Improved growth dynamics; inflation will peak in April; Banxico will look through high inflation levels; the MXN has some room to further appreciate.

Key points

  • We upwardly revised our 2021 GDP growth forecast to 4.7% from 3.2%; upward bias on probable larger boost from US dynamic growth
  • The outlook for formal job creation is improving with an upwardly revised GDP path; yet, we do not expect a return to pre-pandemic levels until 2022
  • FX: the MXN still has room to catch up with EM currencies’ average performance since the start of the global pandemic (Feb-2020)
  • Banxico will likely look through the temporary rise in inflation, which mostly reflects a spike in energy prices
  • The 2022 General Economic Policy Preliminary Guidelines released by the Finance Ministry anticipate an improved outlook for public finances in 2021

 

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