Mexican Central Bank governor forecasts 2.8 per cent growth in 2008

[Report by Marcela Ojeda Castilla: Banxico Predicts 2.8 per cent Economic Growth for 2008]

Bank of Mexico (Banxico) Governor Guillermo Ortiz Martinez predicted that at the end of the year economic growth will be 2.8 per cent, which is in line with the predictions of the Finance and Public Credit Secretariat (SHCP) and the Economic Commission for Latin America and the Caribbean (ECLAC).

"Indeed, it's a fact that Latin America as a whole is growing at a greater rate than Mexico; not just this year but also for several years now the country's development has been lagging behind, and we've commented on that a lot," he added.

Banxico has a GDP growth estimate for 2008 of between 2.75 per cent and 3.25 per cent, while the SHCP's prediction is 2.8 per cent.

Just this past Tuesday [ 22 April], ECLAC predicted that Mexico will grow 2.7 per cent this year, which would make it the least dynamic country in the region.

At the end of the month, the central bank will review its prediction for the growth of the Mexican economy and will probably keep it in line with the SHCP's forecast.

On another matter, Ortiz Martinez emphasized that the main risks to inflation are in new shocks that might affect the prices of food raw materials, in a more prolonged effect of the disruptions that have already occurred, in greater than expected energy prices, and in the fact that the price formation process could be negatively affected.

Before members of the Finance Committee of the Senate of the Republic, he emphasized that at the end of March, while annual general inflation was 4.25 per cent, food inflation was 6.32 per cent and energy-related inflation was 4.9 per cent.

During the meeting, he emphasized that inflation worldwide, which was on a downward trend in the 1990s, has been increasing since the end of 2005, precisely because of food and energy pressures.

He maintained that the issue of domestic supply is a fundamental global concern because inventories are low, and he said that this aspect will be the subject of a wide-ranging discussion worldwide.

With regard to the fact that Mexico's economic growth has lagged behind for several years, he noted that it is essential for public policies to be aimed at economic dynamism.

He thought, however, that during this period of a slowdown in economic activity caused by the recession in the United States, the government is responding correctly.

"I think the Infrastructure Plan will mitigate this slowdown to a great extent, and even though it's true that the growth rate of the Mexican economy will decrease compared to last year, we're very far from falling into a situation like that of 2001, during the last recession in the United States.

"I think we have many more resources to (withstand) this, as the first quarter figures have shown," Ortiz Martinez noted.

Energy Reform

In addition, when talking about the energy reform, he said that it goes beyond the current situation.

"It's not aimed especially at the short term. I think instead it's aimed at the medium and long terms. And the main thing is to stop the decline in energy production, increase the country's production capacity, and have a reliable, safe, and efficient energy supply."

He added that these will be issues to be discussed over the coming weeks and that, from his point of view, we must at least make sure that the energy reform is aimed at strengthening Pemex [Mexican Petroleum].

"Both strengthening and consolidating this enterprise as a truly state-run company that is run exactly like a company, has flexibility, has resources, and can have a long-term perspective," Guillermo Ortiz concluded.

Source: El Financiero website, Mexico City, in Spanish 24 Apr 08

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