Public accounts and nearshoring will give powers to the superweight in 2023

The peso-dollar exchange rate would depreciate 4.15% from its current levels if the forecast comes true.

“Fiscal austerity, Mexico’s attractiveness for ‘nearshoring’ and an investment universe that has become smaller – investors can no longer invest in Russia, they disinvest in China, Turkey is inoperable – are factors that make Mexico look like a chocolate,” said Gabriel Casillas, Barclays chief economist for Latin America.

Barclays’ forecast paints a more optimistic scenario for the emerging market currency, after Moody’s Analytics predicted a 20% depreciation extended through the end of 2022 and 2023 and even into 2024.

Asked about Moody’s forecast regarding an upcoming correction, Barclays analyst Erick Martínez underlined his “clear disagreement”.

Martínez noted that the Mexican peso could experience bouts of volatility if economic problems deepen in early 2023, but would return to attractive levels as central banks ease their monetary policies.

“The dollar is overvalued precisely because the US Federal Reserve’s monetary policy is in a tightening cycle,” he said. “As it eases, the dollar will return to its fair price,” he added.

Barclays also projected economic growth in Mexico for 2023 of 0.9%, below the 2.5% expected for 2022, after a possible global economic recession during the first two quarters of next year, without any increase during the first and with a setback of 0.1% during the second.