They warn of an imbalance in the country's economy

They warn of an imbalance in the country's economy

Mexico City– Moody's Analytics warned that the country's economy has developed internal and external imbalances that increase its vulnerability and could create conditions for a sudden adjustment if they are not neutralized in time.

Alfredo Coutinho, director of Latin America at Moody's Analysis Unit, said current imbalances had surpassed the levels that caused the last crisis at the end of the six-year period at the end of 1994, although current circumstances are different.

Imbalances occur when there are imbalances between two variables, far from their equilibrium point, changing the economic system.

The factors that led to these imbalances are: the acceleration of consumption that led to increased domestic demand, excess cash liquidity, and the strength of the peso which in turn led to increased imports, as Coutinho detailed in an analysis on the economic prospects for 2024. For Mexico.

He explained that in 2023, the economy was performing at a feverish pace as a result of the continued acceleration in domestic absorption. Therefore, economic growth during the year was higher than the estimated potential growth of 2.5 percent.

“As a result, the economy developed a growing internal imbalance that was expressed in excess domestic demand,” he stressed in the analysis published on Thursday.

He explained that when the economy suffers from surplus demand for a long period, national production is not able to meet internal demand, so the surplus tends to absorb both inflation and external imbalance.

Therefore, he pointed out that it is not surprising that inflation shows resistance to a rapid decline and that the volume of imports far exceeds the volume of exports.

See also  Cuban government anonymous attack pages Cuba Libre - International

He emphasizes that the strengthening of the peso also played an important role in the growing external imbalance, which led to lower import prices.

He pointed out that the effect of the exchange rate rise contributes to reducing internal inflation, so we can expect inflation to continue its gradual decline due to the effect of the exchange rate and monetary restrictions, but at the expense of a greater amount of inflation. External imbalance.

Although he warned that the negative of this is that the external imbalance increases the fragility of the economy and generates the effect of displacement on national production.

Coutinho warned that the expanded fiscal program approved for 2024 could add more fuel to domestic demand and increase excess demand with greater consequences in widening external imbalances.

This could further weaken the Mexican economy.

He stated that, therefore, it is necessary for economic, fiscal and monetary policy to redouble efforts to reduce the fragility of the economy and avoid the risks of hasty economic adjustment.

Aygen Marsh

"Certified introvert. Extreme coffee specialist. Total zombie defender. Booze fanatic. Web geek."

Leave a Reply

Your email address will not be published. Required fields are marked *