IMF warns of slowdown in economic activity in Mexico

The Latin American country’s Foreign Exchange Commission, formed by the Ministry of Finance and the central bank, later said in a statement that it will continue with the gradual exit strategy of the LCF, originally announced in 2017.

“Economic activity is moderating, private consumption and investment are slowing, and employment growth is slowing,” the IMF said, blaming the results on the restrictive monetary policy of Bank of Mexico (Banxico).

Since August, the monetary entity began to reduce the key rate until it reached 10.5% at the end of September, amid a cooling of inflation and a weakening of the economy.

According to the IMF, inflationary pressures are declining in the country and consumer prices are expected to reach the 3% target by 2025.

“Despite the expansionary fiscal stance, the economy’s growth is expected to slow to around 1.5% this year,” the Fund warned.

Large-scale fiscal consolidation, supported by well-identified measures, will be necessary to preserve fiscal sustainability, the IMF noted, and recommended gradually eliminating monetary restriction.

In addition, he pointed out that Mexico maintains important reserves, a sustainable external position and effective financial supervision, but warned that Latin America’s second largest economy remains exposed to significant external risks amid persistent uncertainty.