Slowdown in the US could drag on Mexico

A MORE protracted slowdown in United States’ growth would prove to be “a material drag” to Mexico’s economy, the International Monetary Fund cautioned yesterday.

“Although the direct impact from unsettled market conditions in Europe would remain contained, a surge in global risk aversion and generalised flight to quality could affect even strong sovereign credits like Mexico’s,” the IMF said in its annual review of Mexico’s economy published on Monday.

The International Monetary Fund assessment was conducted before concerns over the European debt crisis and a United States debt rating cut on Friday sent stocks tumbling towards 11-month lows yesterday, prompting growing concerns of another global recession.

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Mexico’s economy was hard-hit by a global recession in 2009 but has rebounded strongly since then, led by manufacturing exports and a rise in domestic demand.

The IMF forecast strong economic growth into 2012 for Mexico and said monetary policy was “appropriately supportive” given that inflation pressures were contained.

“Inflation pressures remain subdued and medium-term inflation expectations are firmly anchored, albeit still somewhat above target,” the IMF said.

The fund said IMF estimates indicate that the Mexican peso “is broadly in line with fundamentals” despite an appreciation of about 10 per cent against the American dollar over the past year.