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Mexico’s Economy Could Rebound with 5 Percent Growth this Year

Mexico’s economy, recovering from its worst recession in decades, could grow as much as 5 percent in 2010, the country’s central bank head said on Sunday, raising his outlook in line with analyst views.

Central Bank Governor Agustin Carstens told an annual Inter-American Development Bank meeting in the Caribbean resort of Cancun that Mexico’s economy could grow between 4 percent and 5 percent this year.

“We are in a strong recovery process … it’s very likely that Mexico will end this year growing between four and five percent,” Carstens told reporters. “Aggregate demand is growing faster in Mexico. That means the output gap will probably close down faster than we anticipated some months ago.”

In January, Carstens said Mexico’s economy would likely grow between 3.2 percent and 4.2 percent in 2010. In February he told Reuters he shared the finance ministry’s view that 2010 growth looked set to come in around 3.9 percent.

Economists and the government say exports, consumer demand and credit from banks are all growing faster than expected.

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However, the growth still looks unlikely to make up for a 7 percent decline in gross domestic product last year, the largest in Latin America and caused largely by a plunge in U.S. demand for Mexican-made cars and other exports.

Analysts say the impact on Mexico of the recession in the United States, its main trading partner, was exacerbated by a lack of major economic reforms in areas like tax, the oil industry and labor laws.

Carstens added that the central bank could move to raise interest rates if it finds that recent tax increases are starting to push up consumer prices. (Writing by Robin Emmott; Editing by Catherine Bremer and Diane Craft)

About Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.
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