NEW YORK (Reuters) - Mexican Finance Minister Luis Videgaray on Wednesday stood by his government’s recently downgraded economic growth forecast for 2014, saying activity is picking up, aided by signs of strength in the United States.
Videgaray told Reuters the gross domestic product projection of 2.7 percent implies an accelerated growth rate for the rest of the year, following a seasonally adjusted 1.1 percent GDP figure in the first quarter.
Last month the government cut its estimate for annual growth in 2014 from 3.9 percent, and last week the central bank cut its benchmark interest rate to a record low in a bid to boost activity.
“There hasn’t been any information after we made the forecast that implies a need for a change. In fact, the most recent figures out of the Mexican economy, job creation, industrial production, retail sales, point towards a recovery and are quite consistent with the 2.7 percent forecast,” he said after speaking with investors in New York.
On Wednesday, Mexico reported industrial production in April rose by the most in over a year as manufacturing and construction expanded.
The central bank, on June 6, lowered the benchmark interest rate by 50 basis points to 3.00 percent, a move that shocked economists who forecast no change in policy for Latin America’s No. 2 economy.
Videgaray would not comment on what he thought the central bank would do next, pointing instead to Banco de Mexico’s communique stating it did not intend to further cut interest rates.
The harsh winter in the United States, which is Mexico’s top trading partner and destination for 80 percent of its exports, stunted growth in the first quarter in both nations, Videgaray said.
The U.S. economy contracted 1 percent in the first three months of the year due to disruption caused by a long stretch of severe winter storms.
“But it will pickup. It is already picking up. The latest figures for the U.S. economy look better than they did in the early months of the year and we expect that trend to continue,” Videgaray said.
“We are very much linked to the cycle in the U.S. and it looks as if we are gradually entering into a better cycle.”
Editing by Andrew Hay