Mexico: Growth forecast upwardly revised, Banxico to raise rates further – BBVA

The Research Department at BBVA upwardly revised the 2021 GDP growth forecast to 6.3% from 4.7%. They consider the Bank of Mexico will continue increasing the reference interest rate for the rest of the year unless inflation drops more than expected.

Key Quotes: 

“More dynamism of consumption amid higher mobility and economic reopening. Investment recovery higher-than-expected in 1Q21, but still incomplete.”

“For 2022 we upwardly revised the GDP growth forecast to 3.0% from 2.8%, driven by an improved investment outlook. Slow formal employment growth in the first half of the year. Nevertheless, we expect it to gain momentum in 2H21 on the economic reopening and higher expected GDP growth.”

“We expect Banxico to hike rates in the next three monetary policy meetings with above-5.0% headline inflation and above-4.0% core inflation for the rest of the year.”