MEXICO CITY, Oct 13 (Reuters) – Deputy Central Bank Governor Jonathan Heath expects Mexico’s economy in 2023 to begin recovering losses from the pandemic, but the expansion will be “relatively slow” due to weak foreign investment flows, according to comments released on Wednesday.

Mexico’s economy plummeted 8.5% in 2020 due to the COVID-19 pandemic and the central bank, known as Banxico, estimates that Latin America’s second largest economy will grow 6.2% this year and 3% in 2022.

Heath projected that by the end of next year the local economic activity will reach the peak registered in 2018.

“Starting in 2023, we are anticipating an expansion, but also a relatively slow expansion, where the most absent factor is private investment and that is really going to be, I think, the real challenge from 2023 onwards,” he said in a podcast released by the Banorte Financial Group.

Despite his conservative forecast, Heath dismissed suggestions the country is mired in stagflation, a term used to describe an economy with significant rises in inflation stagnant growth and high unemployment rates.

Mexico’s inflation stood at 6% in September.

“We are in a process of recovery, we are growing, including expansion above 6%, which is projected this year, so that cannot be undervalued,” he said.

“Perhaps it is not enough so that we finish the recovery stage and move on to a new expansion stage, we still have some way to go.”

Heath calculated that the output gap has been closing and is currently close to zero, while in some sectors it is positive.

“That is why we are seeing the ease with which prices are rising,” he said. (Reporting by Sharay Angulo; Writing by Drazen Jorgic; Editing by Aurora Ellis)

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