The economic dynamism seen in the first half of 2022 is waning. The rebound in private consumption is being held back by rising inflationary pressures, while exports are weakening due to slowing growth in the United States and global demand. Structural weaknesses in the economy (low investment, lack of infrastructure) are also limiting the growth recovery. Moreover, a deterioration in public finances is increasingly likely in the medium term [...]
The direct consequences of the war in Ukraine on the Mexican economy should remain limited, because trade links are almost non-existent. However, indirect consequences could have a significant impact on an economy that has already been weakened by the Covid-19 crisis. Higher commodity prices will increase inflation pressure and worsen the current account deficit in Mexico, which has been a net importer of energy since 2015 [...]
Mexico’s medium-term economic prospects continue to deteriorate. The robust recovery already seems to be running out of steam, while the economy’s structural weaknesses (low investment and competitiveness) have been exacerbated by the Covid-19 crisis and by the government’s lack of fiscal support. Yet economic policy is unlikely to change much over the next two years. Following mid-term elections, the governing coalition managed to maintain a simple majority in the Chamber of Deputies [...]
Thanks to a strong Q4 rebound, the contraction in real GDP was limited to 8.2% in 2020, the public deficit did not swell as much as expected, and 2021 growth prospects were given a boost. Yet the recovery is still fragile: private consumption and investment have both taken a lasting hit from the 2020 crisis, and the export sector will not benefit fully from the expected rebound in US growth [...]
Growth prospects are deteriorating constantly in Mexico. In the short term, several factors are weakening the economy, including the impact of lockdown restrictions on domestic demand, the decline in oil prices, the disruption of supply chains and sluggish external demand. Without a fiscal stimulus package, the support measures announced by the central bank will not suffice to offset the enormous shock. In the medium term, the economy’s capacity to rebound is limited [...]
Mexican real GDP fell by 19.9% year- on- year in April. At the same time, industrial production plunged by 30% (the manufacturing component fell by more than 35%). In addition to the domestic impact of lockdown measures, economic activity has been hit by the fall in the oil price, disruption in supply chains, and the sharp decline in external demand (especially from the US) affecting both the export and tourism sectors [...]
According to the first estimates, economic activity contracted for the third quarter in a row in Q4 (-0.3% y/y). Manufacturing industry was the most affected and contracted by 2%. In 2019, real GDP contracted by 0.1%, after recording a 2% growth in 2018. Real GDP growth should pick up in 2020 (+0.6%), but remains under its potential (estimated at 2.5% by the IMF) [...]
Having more or less stagnated in 2019, economic growth is likely to bounce back a little in 2020, boosted by private consumption and net exports. Despite an infrastructure programme that is largely open to the private sector, the outlook for investment is struggling to improve. One year after Andres Manuel Lopez Obrador, generally known as AMLO, came to power, his economic policy is still hard to decipher. The lack of clarity on energy sector reform is also affecting investor sentiment [...]
After recording a 1.2% y/y growth in Q1, real Mexican GDP contracted by 0.7% y/y in Q2. The lack of dynamism of US activity, weighing on the Mexican export sector and the significant slowdown in both public and private investments, due to deteriorating business and investment sentiments, are the two key factors explaining the slowdown. For the same reasons, the risks remain tilted to the downside for the coming quarters.
Mexico’s economic growth prospects are deteriorating: slower growth in the US, fiscal austerity and low investment levels have dragged down growth in the last two quarters. The slowdown is likely to continue, despite support from consumer spending. The threat of trade tensions with the United States and the lack of clarity in Mexico’s economic policy, as shown by the troubled implementation of its energy reforms, are adversely affecting the investment outlook [...]
Prospects for the economic growth in Mexico are deteriorating, owing to slower economic activity in the US, a tight fiscal stance and a persistent weakness in private investment. Real GDP growth for Q1 slowed to 1.2% y/y, from 1.7% y/y in Q4 2018. For the whole year, real GDP growth should reach 1.5% (from 2.0% in 2018) and risks are tilted to the downside [...]
The election of Mexico’s new president, Andres Manuel Lopez Obrador, raises numerous questions. Although the new president and his team enjoy strong popular support, investors are worried about the policies he is proposing for the next six years. Some of the proposals do not seem to be compatible with his promise to maintain fiscal discipline, central bank independence and economic pragmatism in general. Several existing reforms are being called into question, notably in the energy sector [...]
While having signaled a pragmatic approach to policy a few days after his election on the first of July, Andres Manuel Lopes Obrador (AMLO) seems to change his words. Late October, after a contested public consultation, the new president cancelled the Mexico City Airport Project. At the same time, he announced his intention to change the Constitution, as soon as he comes to power on December 1st, to broaden the scope of public consultations in particular to budget-related issues [...]
The USA, Mexico and Canada have completed negotiations on a new trade deal to replace NAFTA, which has been in force since 1994. The signature of an agreement in principle is good news for Mexico, as it will calm uncertainties about future trade links with the USA. On the domestic front, the new government is preparing to take power on 1 December. The reforms proposed are already some distance from the statements made during the campaign [...]
Preliminary data for Mexico’s growth in 1Q 2018 surprised to the upside, with real GDP expanding 1.1% q/q, the highest level since 3Q 2016.
The countdown is on for a new NAFTA treaty before the Mexican general elections on July 1 and the US mid-term elections on November 6. The deadline is set at early-May (180 days before the elections) for the US administration to submit the text to the current Congress. Otherwise, negotiations are expected to last until 2019, with the risk that the next Mexican administration and US Congress somewhat reshuffle the cards. Meanwhile, the US-Mexico trade link still stays the course [...]
Mexico is the second largest economy in Latin America after Brazil, and enjoys abundant natural resources. Until 2018, Mexico enjoyed healthy macroeconomic fundamentals, supported by an high level of diversification and resilience to economic shocks following a series of structural reforms implemented in 2014. Real GDP grew by 2.7% on average in 2014-2018.
However, even before the COVID-19 outbreak, real GDP growth had been slowing (real GDP decreased by 0.1% in 2019) and macroeconomic fundamentals have been eroded, following the election of Andres Manuel Lopez Obrador in mid-2018. Uncertainty surrounding its policy decisions (and particularly the participation of the private sector in key sectors of the economy, such as the energy sector), along with the erosion of institutional strength in the regulatory framework, have resulted in a significant deterioration in the business climate. In this context, the Covid-linked crisis added to structural weaknesses and led to a severe recession in 2020.
