Mexican economy could be affected by stagflation in the US

The US economy could experience a stagflation scenario, a term used to explain economic stagnation accompanied by high inflation and higher unemployment, according to an analysis by the Mexican Senate’s Belisario Dominguez Institute (IBD).

The report notes that the collapse of Silicon Valley Bank in March 2023 could generate a contagion that affects the entire financial system of the United States, Mexico, and the rest of the world.

“Given the great dependence of Mexico’s economy on that of the United States, a stagflation scenario in the US economy would increase the probability of low growth in the Mexican economy,” says the analysis, led by researcher Jaime Del Río Monges, of the IBD’s general directorate of finance.

According to the study, the possibility of Mexico also falling or “being pushed” to a “stagflation” scenario is not ruled out in this scenario.

For researcher Del Rio, the challenge for the Latin American country’s economy will be to try to avoid economic stagnation.

Last April 5, 11 Latin American and Caribbean countries, including the two regional economic powers, Brazil and Mexico, signed an agreement to reduce the adverse effects of inflation.

Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Cuba, Honduras, Mexico, Venezuela, and St. Vincent and The Grenadines signed the Alliance of Latin American and Caribbean Countries against Inflation.

In the framework of this pact, they agreed, among other things, to exchange basic food basket products and other goods to lower costs and reduce the regional rise in inflation.

According to the Mexican National Institute of Statistics and Geography (Inegi), in March 2023, the country’s inflation stood at 6.85%.

With information from Sputnik