June 21, 2021

Mexico's financial authority supports maintaining a sound macroeconomic framework

Mexico's financial authority supports maintaining a sound macroeconomic framework

The Ministry of Finance and the Bank of Mexico today highlighted the importance of having a sound macroeconomic framework and staying alert so that Mexico's economy is well positioned to face "adverse shocks".

"It is important to maintain a solid macroeconomic framework that continues to preserve price stability, fiscal discipline, and financial stability," the agencies said at a meeting of the financial system's stability council.

In a statement, the Council stressed the importance of financial authorities "being alert" if necessary "to take complementary measures that contribute to strengthen the financial system and safeguard its stability."

On December 1 will begin the government of President Lopez Obrador, who has pledged to maintain a surplus of 1% and a parity of the peso of around 20 per dollar.

The Council highlighted as positive that the International Monetary Fund recognized that Mexican authorities have an adequate record of implementing public policies and that the country has a solid fiscal and monetary policy framework.

When updating its balance of risks, the Stability Board of the Mexican Financial System highlighted among the internal and external factors facing the Mexican economy.

Internally, there is the fact that advances in the negotiation of Mexico's new trade agreement with the United States and Canada help to reduce uncertainty about the future of the region's trade relationship, despite the lack of ratification in the Congresses

The agency stressed the change in the credit rating of the country from stable to negative made by two rating agencies is a response to the uncertainty regarding economic policies that could be implemented in the coming years in Mexico.

"In this context, the country risk indicators and the medium and long-term interest rates have increased, while the exchange rate of the peso against the dollar has depreciated and has shown greater volatility."

The Council stressed that the world economy has continued to grow, albeit at a more moderate pace and with greater differences between countries; particularly in the United States, with a relatively high expansion of activity.

Interest rates rose and the dollar appreciated, while growth in other economies was lower than expected and growth prospects for 2018 and 2019 have been revised slightly downward as a result of the effects of the escalation of disputes commercial.

In this environment, the Mexican Council said, there have been episodes of volatility in the international financial markets and the price of the assets of the emerging economies have had a negative behavior.

Among the main external risks is the escalation of global trade tensions, the tightening of financial conditions due to rising rates in the United States, geopolitical issues and a slowdown in world growth greater than anticipated.


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