Mexico Sees Growth Of Up To 3% This Year, Eyes Nearshoring Boost

• The Mexican economy could grow up to 3.0% both this year and next, boosted by increased manufacturing investment and cooling inflation, according to a copy of the government's latest budget forecasts.
• The Ministry estimates Latin America's second-biggest economy will expand between 2.2% and 3.0% this year, and between 1.6% and 3.0% in 2024, the document showed, as the country continues to claw back pandemic-led losses.
• For 2023, the "lower end of the range was adjusted upwards due to the good performance of the domestic economy," said the document containing preliminary forecasts for next year. Additionally, Mexico's inflation rate by the end of this year is seen slowing to 5.0%, and then to 4.0% by the end of 2024.
• As inflation climbed worldwide, central banks rushed to hike interest rates and slow the trend. Mexico's central bank raised rates 25 basis points to 11.25% last Thursday but hinted the hiking cycle could be nearing its end.
• Notably, Mexico is also primed to benefit from private investment fueled by "nearshoring," the trend of moving production to North America and away from Asia, the ministry said. Nearshoring could add up to 1.2 percentage points to GDP the ministry said, without specifying a time frame.
• In particular, the ministry anticipated a boost to foreign investment in manufacturing and said the automotive industry was a "natural candidate" to take advantage of nearshoring. Electric vehicle maker Tesla recently announced it would build a "gigafactory" in the northern border state of Nuevo Leon, which local officials have said could bring in up to $10Bn in investment and create 10,000 jobs.

(Source: Reuters)