MEXICO CITY Mexico's economy, the second biggest in Latin America, could expand by 3.5% or more this year, a senior finance ministry official said on Wednesday, as one central banker flagged a "long battle ahead" to better corral creeping consumer prices.
In testimony before lawmakers, Deputy Finance Minister Gabriel Yorio talked up the expected expansion of the country's gross domestic product (GDP), and largely dismissed concerns that the gaining value of the local currency was bad for shipments to foreign markets.
Yorio, speaking before the Mexican Senate, said government debt should land at about 47% of GDP this year and then tick up next year to almost 49%.
He stressed that there is no indication so far that the Mexican peso, which strengthened over 14% against the U.S. dollar in the first nine months of the year, was harming the country's large export sector, which is anchored by automaking.
Yorio said he sees annual inflation stabilizing at around 4.5% toward the end of the year.
Annual headline inflation in the first half of October hit about 4.27% in the period, official data showed, down from the end of September and undershooting forecasts of 4.38% in a Reuters poll.
However, Bank of Mexico board member Jonathan Heath cautioned that the slowing pace of the inflation rate in recent months should not prompt premature celebration, local media outlet El Financiero reported on Wednesday.
"Inflation continues its downward trajectory, however we're not even close to singing victory. We still see a long battle ahead and this inflation phenomenon has really been much more complex than we would have imagined," said Heath.
His comments come as the central bank has kept its benchmark interest rate at 11.25% since March, following a nearly two-year rate-hike cycle.
(Reporting by Ana Isabel Martinez and Isabel Woodford; Writing by Sarah Morland; Editing by Stephen Eisenhammer and Alistair Bell)
