MEXICO CITY, July 24 (Reuters) - Emerging markets should focus on structural reforms to shore up growth instead of relying on government spending and low interest rates as the U.S. Federal Reserve hikes borrowing costs, Mexican central bank Governor Agustin Carstens said on Friday.
Analysts fear a hike in U.S. borrowing costs, expected in September, will spur investment outflows and hammer their currencies, which have already been hit by a slump in oil prices.
In a presentation posted to the central bank’s website, Carstens said that authorities in these countries must focus on bolstering growth by championing reforms that boost productivity and private investment to confront the imminent risks.
“There is no margin for weak (economic) fundamentals,” he said, according to the presentation. “There is no space to boost growth through expansive fiscal and monetary policies.”
Mexico’s central bank has kept borrowing costs at a record low of 3 percent since the middle of last year, taking advantage of record low inflation to boost sluggish growth despite a tumbling peso.
But policymakers are expected to raise interest rates in September alongside the Fed. (Reporting by Alexandra Alper; Editing by Leslie Adler)