Mexico central bank paints rosier picture of economic recovery

MEXICO CITY (Reuters) - Mexico’s central bank on Wednesday gave a more optimistic view of economic growth and job creation for this year and next than previously forecast, but said the coronavirus pandemic still posed serious risks to the outlook.

FILE PHOTO: The logo of Mexico's Central Bank (Banco de Mexico) is seen at its building in downtown Mexico City, Mexico February 28, 2019. REUTERS/Daniel Becerril

In a quarterly report, the bank said its central scenario was that gross domestic product would expand by 4.8% in 2021 and by 3.3% in 2022, up from prior forecasts of 3.3% for 2021 and 2.6% growth for 2022 for Latin America’s No. 2 economy.

Mexico’s economy suffered its steepest recession in almost 90 years in 2020 as the coronavirus pandemic battered activity.

Nevertheless, Banxico, as the Bank of Mexico is known locally, noted that by the final three months of the year, the pace of recovery was stronger than anticipated.

The brighter forecasts for the economy are based on a higher growth base at the end of 2020 and from a stronger growth forecast for U.S. industrial activity, said Banxico.

However, over the near term that will be partially offset by greater economic weakness in early 2021, it said.

Central Bank Governor Alejandro Diaz de Leon said the speed of economic recovery would vary from country to country, and would depend significantly on the rollout of vaccines against COVID-19 and the magnitude of economic stimulus measures.

Mexico has injected little stimulus and has struggled to get in deliveries of vaccines promised by pharmaceutical firms.

Taking questions on a virtual call, he said the bank would be paying close attention to the pace and impact of the U.S. recovery and other external factors as it weighed its options.

The pandemic remained a serious risk factor, he said.

All told, Banxico expected between 250,000 and 570,000 jobs paying social security benefits to be added this year, up from a forecast of 150,000-500,000 three months ago.

Reporting by Anthony Esposito; Editing by Chizu Nomiyama