MexECON Blog

Central Bank Chief Says GDP to Grow 3.5 Percent in 2012

In a speech today, Banco de México Governor Agustín Carstens said Mexican gross domestic product (GDP) would likely grow about 3.5% in 2012, while consumer prices would rise between 3.0% and 4.0%.  According to Carstens, the three main sources of Mexico's current economic growth are domestic demand, foreign investment, and exports.  Carstens said that even if the external economic environment remains unfavorable for the next several years, these factors could keep the Mexican economy growing.

Comment:  The central bank chief's economic forecasts today are in line with his recent comments and the recent expectations of other forecasters.  For example, the International Monetary Fund currently predicts Mexican GDP will grow 3.6% in 2012, down from approximately 3.8% in 2011 but still above its 20-year average growth rate of 2.8%.  Carstens's list of Mexican growth drivers is also consistent with the country's recent economic data.  In contrast, however, his outlook for inflation may be somewhat optimistic.  Mexico's November consumer price index was up just 3.5% from one year earlier, but the big drop in the value of the peso since mid-summer should put additional upward pressure on prices.  Indeed, wholesale prices in Mexico have been rising much faster than consumer prices, suggesting there are significant price pressures in the pipeline.

Patrick Fearon, CFA
Vice President, Fund Management

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