Mexico’s GDP will grow 1.9% during 2022, according to the Economic Commission for Latin America and the Caribbean ( ECLAC ), and the slowdown in the subcontinent’s economy is expected to increase during the next year.
The region will grow 2.7%, less than half of what it grew in 2021.
“The region is returning to a trend of low growth that was already observed in the pandemic with great force and this dynamic is accompanied by high inflationary pressures that implies challenges for economic policies in the region,” said Daniel Titelman, in a conference on Tuesday. Director of the Economic Development Division of ECLAC.
The GDP of 16 countries in the region —including Mexico— will not return to pre-pandemic levels in 2022, ECLAC predicted. “The real level of the Mexican economy is similar to that of 2018 and we expect Mexico to recover its pre-pandemic level of activity until 2024,” Titelman said.
This scenario implies the risk of increased poverty and inequality, as well as greater social conflicts. Investment has become a structural obstacle for the region, according to Titelman.
“Investment is the variable that slows down the most. Consumption is what has maintained the dynamism, but it is also beginning to slow down,” he said.
Positive news for the region, especially for Mexico, is the residence shown by remittances, which have continued to increase, which helps consumption continue its dynamism.
The main partners, such as China and the United States, in the region have lower economic growth and that will reduce trade demand this and next year.
The increase in the prices of commodities such as hydrocarbons, food and fertilizers are slowing down world trade and in the region, as well as increasing inflationary pressures.
“It is generating strong social problems given the high probability of a world famine,” says Titelman.
On the other hand, inflationary pressures lead to more restrictive monetary policies in the developed world.
“Central banks have been cautious with the increase in their interest rates, due to the greater acceleration in recent months and the persistence of inflation,” said the ECLAC specialist.
This has caused the country risk in the region to increase, mainly in El Salvador, Argentina, Ecuador and Honduras.
ECLAC highlights that the increases in fuel and food prices are variables imported from the highest inflation in Latin America, which until June 2022 stood at 8.4%.
