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Mexico’s central bank cuts growth forecast

The Associated Press

MEXICO CITY — President Vicente Fox’s government received more bad economic news on Wednesday as the country’s central bank cut its growth forecast for 2003 to 2 percent from 2.4 percent.

It was the second time this year that the forecast for gross domestic product growth had been cut. The initial forecast of 3 percent growth was abandoned in April.

Hurt by a slowdown in the neighboring United States, the economy grew by only 0.9 percent last year.

The director of economic research for the Banco de Mexico, Manuel Ramos, told a news conference that the new forecast would result in creation of about 150,000 new jobs — far below what is needed to absorb an estimated 1 million jobseekers each year.

Ramos said that the growth forecast could be cut further if U.S. recovery “is not vigorous.”

GDP expanded 2.3 percent in the first quarter. But by the end of May, early readings showed production of goods and services was flat from the end of the first quarter.

Private economists surveyed by the Bank of Mexico in June predicted only 1.2 percent year-on-year growth in the quarter.

Inflation remained low by historical standards in Mexico: just 4.27 percent year-to-year in June. The bank’s inflation target by the end of 2003 is 3 percent.

Fox has grown increasingly defensive in recent months as economic growth has remained slow and unemployment has increased.

On Saturday, Fox said his government has abandoned the idea of a “neoliberal economy” — referring to aggressive free-market policies that some critics claim his government has practiced.

“Starting now, our absolute priority is the strengthening of internal markets, the generation of employees, self-employment and family income,” Fox said in a weekly radio address.