A vendor chats with a customer at a stand in an outdoor market in Mexico City, Mexico January 23, 2022. REUTERS/Luis Cortes/File Photo

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MEXICO CITY, Aug 3 (Reuters) – Bank of America cut its 2023 growth forecast for the Mexican economy to 0% from 1% amid a potential slowdown in the United States, analysts said in a note. research, predicting that the country will reach the brink of recession.

Mexico’s economy has struggled to regain momentum since pandemic-related restrictions eased, while future growth prospects have been hurt by higher interest rates and runaway inflation.

However, the Bank of America (BofA) rating is among the most bearish predictions on Mexico’s outlook for 2023 to date.

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A poll from the country’s central bank recently put the growth forecast for 2023 at 1.6%, down from 1.9%, while the OECD said it expected the gross domestic product of the Mexico increases by 2.6% in 2023 read more .

The IMF recently lowered its growth forecast for Mexico next year to 1.2%.

Mexican President Andres Manuel Lopez Obrador said last month he was optimistic about the economy and ruled out a recession next year, despite a bleaker outlook for the global economy.

“We expect the Mexican economy to decelerate sharply in the coming quarters,” BofA’s rating said earlier this week.

“We believe the main driver will be the deceleration in the United States, partly due to rising interest rates, which we believe will impact Mexico with a lag.”

They also flagged the ongoing dispute over the United States-Mexico-Canada Agreement (USMCA), which accuses Mexico of an energy-related breach, as a downside domestic risk.

BofA now expects 1.9% growth in 2022, down from 1.7% previously.

Nevertheless, analysts noted that an increase in relocation and a continued increase in remittances to Mexico could help “cushion” the drop in growth next year.

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Reporting by Isabel Woodford Editing by Bernadette Baum

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