MEXICO CITY (Reuters) – Mexico’s central bank on Wednesday said the economy could contract by as much as 8.8% in 2020 as it published a range of forecasts due to uncertainty caused by the coronavirus pandemic, and predicted a recovery was likely next year.
Pummeled by lockdown measures against the coronavirus, Mexico’s economy is expected to suffer its biggest contraction in decades this year, with private sector analysts forecasting gross domestic product (GDP) will shrink by up to 10% or more.
Presenting its latest quarterly report, the central bank also revised up its inflation forecasts, in part due to a depreciation of the peso currency, which has fallen by almost 15% against the U.S. dollar over the past three months.
Mexican headline inflation was seen running at 3.5% in the fourth quarter, up from a previous forecast of 3.2%.
Banxico, as the Bank of Mexico is known, cautioned that forecasts were difficult to make during the pandemic. However, the bank estimated that Latin America’s second largest economy could shed between 800,000 and 1.4 million jobs in 2020.
Banxico said the crisis meant the economy could shrink by between 4.6% and 8.8% this year, revising down its forecast from an earlier estimate of 0.5-1.5% growth in 2020.
Depending on the shape of the economic rebound, and whether it is a so-called V-shaped or U-shaped recovery, the bank said growth in 2021 could range from -0.5% to 4.1%.
(Reporting by Mexico City newsroom; writing by Drazen Jorgic; Editing by Dave Graham)
