Agency Moody warned this Thursday of growing internal and external imbalances in economy Mexican in the last year of his presidency Andres Manuel Lopez Obrador which increase their vulnerability and may create conditions for sudden adjustment.
“Current imbalances have exceeded the levels that triggered the last major crisis at the end of the six-year period at the end of 1994, although current conditions are different. Reducing economic vulnerability requires short-term policy adjustments,” Moody’s Analytics said in a report.
The analysis recorded excess demand equivalent to approximately 6.5% gross domestic product (GDP), above the bottom 4% in 1994, when the presidency Carlos Salinas de Gortari (1988-1994) in conditions of economic crisis.
While he was counting external deficit just over 7% of GDP, down from almost 4% in 1994.
“When an economy suffers from excess demand over an extended period, national output is unable to meet domestic demand, so this excess tends to offset both inflation and external imbalances,” Moody’s explained.
The agency believes that “greater pressure from consumption has resulted in the economy operating above its production capacity.”
He attributed this to the continuation of expansionary monetary policy along with government cash transfers, policies to increase salary the minimum is much higher inflation, and increasing volume Money transfers outside.
“The expansion in domestic demand, mainly driven by acceleration in consumption, added fuel to the fire of domestic prices and pushed inflation to a peak of 8.7% in 2022,” he said.
Moody’s also attributed the growing external imbalance to the strengthening of the Mexican peso, which rose a record 13% in 2023.
In this context, he said that of the nearly five percentage points of GDP that domestic demand gained over the past five years, almost three points were covered by imports.
In addition, he noted that the expansionary fiscal program approved by López Obrador’s government for 2024, a presidential election year, “could fuel domestic demand and increase excess demand with the more serious consequences of widening external imbalances.”
“This could further increase the vulnerability of the Mexican economy,” he concluded.
(EFE)
Source: Aristegui Noticias
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
