Mexico has a 60 percent chance of entering a recession in the second half of the year, but it will be moderate, in line with what is expected for the US economy, says investment fund operator Franklin Templeton.
Vice President and Co-Director of Investments at Franklin Templeton Mexico, Luis Gonzalez, indicated that the US economy is still strong, as evidenced by positive data for some key variables, including consumption and employment, but it has already begun to deteriorate. .
“They are deteriorating (some economic indicators in the US) and so we can start to see a recession in the third quarter of this year; that is, July, August and September, the beginning of the recession,” he added in a webinar.
And so, he said, Franklin Templeton’s base case scenario for Mexico is a 60 percent chance of a mild recession in the second half of the year.
In addition, Gonzalez expected growth of 1.5 percent at the end of 2023, with inflation of 6.0 percent and a reference interest rate of 11.50 percent, after an increase of 25 basis points at the monetary policy meeting of the Bank of Mexico next May.
They’re deteriorating (some economic indicators in the US) and so we could start to see a recession as early as the third quarter of this year; ie July, August, September, the beginning of the recession
Luis Gonzalez, Vice President of Franklin Templeton Mexico
And he ruled out the political risks of moving forward in Mexico, because the ruling party, Morena, does not have the power to make profound changes, so changes are not expected except through decrees or appointments, with the aim of rooting the legacy of the current government.
Regarding the administrative reform proposed by the executive authority, which proposes changing 23 federal laws, and one of its main points is placing restrictions on compensation, he saw that it could affect the level of confidence in investment.
“We don’t have a clear position on how it will impact the business more than it is a matter of confidence going forward,” said Vice President and Co-Director of Investments at Franklin Templeton Mexico.
However, he made it clear that despite the calmness of political risks in the country, they will intensify after the elections for the governor of the state of Mexico and Coahuila in the middle of this year, with which the open race for succession will begin. Presidential, “This will begin to generate speculation, noise in the future.”
We will not be excluded from the political noise, perhaps the year 2024 will be even more uncertain than before; However, we give this little chance of affecting the country’s financial or business environment,” Gonzale stressed.
Regarding the possibility of the country facing more commissions to resolve trade disputes under the Treaty between Mexico, the United States and Canada (T-MEC), he said there is always a risk, but he estimated that the government will try to avoid it at all costs and look for a solution behind the scenes for any problem that arises.
He expected Mexico to maintain the investment rating on its credit ratings even after 2024.
