Mexican central bank expects economic growth of 4-5 per cent

Apr 28, 2010, 22:03 GMT

Mexico City - Mexico's central bank estimated Wednesday that the country's gross domestic product will grow by 4 to 5 per cent this year, 0.8 percentage points above expectations three months earlier.

'The improvement in the expansion prospects for the industrial production of the United States, together with the recent evolution shown by economic activity in (Mexico), suggest that in 2010 the GDP in Mexico will grow above earlier projections,' the Bank of Mexico said in its quarterly report.

Central bank chief Agustin Carstens said inflation was expected to be 4.75 per cent to 5.25 per cent in 2010. At the end of the previous quarter annualized inflation figures stood at 3.98 per cent.

According to the central bank, the rise in inflation projections was due to an increase in taxes for 2010, the decision to gradually increase petrol prices and hikes in tariffs for some public services, as well as to volatility in the price of fruit and vegetables.

'We consider this increase in inflation to be of a temporary nature,' the bank said.

It noted that the Mexican economy - the 13th-largest in the world - showed signs of recovery through an increase in manufacturing production in the first quarter, due to an increase in exports to the United States.

However, Mexican industry was still operating 'below its production potential,' with a weak recovery in consumption and low levels of private investment.