By MEXICO CITY (Reuters) – The International Monetary Fund (IMF) on Tuesday said it sees Mexico’s economic growth slowing to around 1.5% this year, citing capacity constraints and tight monetary policy.
Growth is seen slowing to 1.3% next year in Latin America’s second-largest economy, the IMF said in a statement, when inflation is also seen closing in on the central bank’s target of 3%.
Mexico’s central bank, known as Banxico, lowered its benchmark interest rate to 10.50% in a split decision in September.
But minutes from the meeting showed that the board members expect easing inflation could allow for further rate cuts.
“Inflation risks remain on the upside,” the IMF said, warning that weaker-than-expected economic growth in the United States, increased global risk aversion and unforeseen effects from recent reforms could weigh on Mexico’s output.
The IMF said that a recent judicial reform creates “important uncertainties about the effectiveness of contract enforcement and the predictability of the rule of law.”
Mexico’s ruling party and allies pushed through the reform last month, arguing it will reduce corruption in the judiciary by implementing the popular election of judges and magistrates.
But it has sparked concerns from major trade partners like the U.S. and Canada and protests from judges and magistrates.