Mexico's central bank cuts GDP growth forecast to 1.1-2.1%

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Due to a growing weakness of investment and a downward trend in the country’s oil production, the Bank of Mexico (Banxico) has once again cut its economic growth forecast for 2019 and 2020 .

Banxico revised its previous forecast of 1.7%-2.7% downward, anticipating a GDP growth of between 1.1% and 2.1% , whereas its economic growth forecast for 2020 went from 2%-3% to 1.7%-2.7% .

Data published this week showed the economy grew by just 0.2 percent in the fourth quarter period from the previous quarter, and contracted in December .

However, this scenario is subject to a stable macroeconomic framework and sustainable public finances.

A continuation of recent fuel shortages, road blockages and strikes could also negatively affect growth, the bank said.

If the “current mood of uncertainty that has been affecting investment” continues or worsens, that would put further pressure on growth, as would a fresh downgrade in the rating of state-run companies, notably Pemex , the bank said.

Those remarks followed a warning from the bank last week in the minutes of its latest monetary policy decision about the risk Pemex poses for government finances.

Nevertheless, the Bank of Mexico’s inflationary expectations improved, anticipating that this year’s inflation goal would be fulfilled in the second half of 2019 and would reach 2.7% in 2020 .

This is due to a favorable rate of prices for agricultural products , lower pressure on the exchange rate, and a new tax relief program in northern Mexico.

In presenting their quarterly report for October-December 2018 , the central bank also revised its productive employment generation prospects downward. While the country was expected to generate between 670 and 770 thousand new jobs in 2019, Banxico cut its forecast to between 620 and 720 thousand .

The bank, which held its benchmark lending rate at 8.25 percent earlier this month, cited possible delays to ratification of a new free trade agreement between Mexico, Canada and the United States as an additional risk to growth.