Mexico's economy should rebound more clearly in H2 2014 as growth increases, says central bank official; Mexico's finance ministry predicting 3%-4% growth for country this year, while central bank expects 3.23% growth, up from 1.1% in 2013

Cindy Allen

MEXICO CITY , April 2, 2014 (Thomson Reuters Corp.) – Mexico's economy should rebound more clearly in the second half of the year as growth picks up for top trade partner the United States, a central bank deputy governor said on Tuesday.

Mexican growth sank to a four year low of 1.1 percent last year, as industry and spending disappointed, clouding hopes for a robust recovery this year.

Data on Tuesday showed sentiment in Mexico's manufacturing sector, which sends 80 percent of its exports to the United States, declined in March for the second month in a row, after bad weather in the United States crimped American demand.

Mexican central bank board member Manuel Sanchez said Mexico's economy should pick up more noticeably during the final six months of the year as better weather in the United States translates into stronger demand for Mexican exports.

"The Mexican economy is going to recover. I think in the second half of the year it's going to be clearer," Sanchez told Reuters. "The United States is on a clear path of robust growth and that has to benefit Mexico."

He said he expected the recovery to continue into 2015 as a raft of structural reforms approved by Congress last year, including a bid to boost private investment in the ailing energy sector, lifts growth over the medium term.

"We definitely are still seeing slack, when the economy grows at a rhythm like the one we are seeing," Sanchez said, adding that the balance of risks to growth has not improved.

Sanchez said on Saturday that the bank would likely revise down its 2014 growth estimate of 3 to 4 percent, though Mexico's finance ministry on Monday maintained its forecast of 3.9 percent growth for this year.

Analysts polled by the central bank expect growth of 3.23 percent.

Sanchez said that inflation is heading for the bank's 3 percent goal, despite an uptick in January to an eight month high thanks to new taxes.

"Inflation is going well. It's going down where we like it to go," Sanchez said.

Annual inflation in early March cooled more than expected to below 4 percent, the central bank's upper limit, backing bets that policymakers will leave interest rates on hold this year.

Banco de Mexico kept interest rates at a record low of 3.5 percent last month, citing slack in the economy while noting that the recent spike in inflation had eased and was unlikely to spur wider price pressures.

Policymakers had cut rates in September and October to boost growth.

(Editing by Andrew Hay)

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