Mexico is dealing with an inflationary process that is hindering its recovery, but it is not entering the stage of stagflation, said Jonathan Heath, deputy governor of the Bank of Mexico (Banxico) in an interview with Banorte for his institutional podcast entitled Economic North.
Stagflation is a term used to describe an economy that shows significant acceleration in inflation, high unemployment, and a lack of growth.
“I think stagflation is not the right term because we are not stagnant. We are in a process of recovery. We are growing, including growth above 6% that is projected for this year cannot be underestimated, ”he said.
The official explained that current growth may not be enough to overcome the recovery stage, but the fact of having growth in the Gross Domestic Product takes Mexico out of that category.
“Talk about stagnation, no. It is an inflationary process that is making the recovery process difficult. We would have to find an original term to describe that, but I would not call it stagflation “
Global inflation worries, but local inflation is more worrisome
Mexico faces international inflationary shocks, but also structural and local factors that push merchandise prices up.
“Many of these supply shocks come from outside; however, we also have our own shocks. Our production chains have also been interrupted right here in the country; we have had some idiosyncratic clashes, so to speak; (…) and we have been greatly affected by the taking of the trains from the railways ”, he added.
In September, inflation reached 6% at an annual rate, double the objective of the Bank of Mexico, pressured by food and energy prices.
“It is a combination of many things, but normally when we have a supply shock that affects some basic prices, what we have to make sure is that it does not start to generalize, that there are no secondary effects and that other prices do not start to increase. That is perhaps one of the parts that are worrying us the most, ”he said.