Mexico Economic Forecast

Mexico Economic Outlook

July 12, 2016

Following solid growth in Q1, Mexico’s economy is expected to have shifted to a lower gear in Q2. A lack of traction in the manufacturing sector is partly responsible for the slowdown in Q2 with no visible signs of a pick-up any time soon. Healthy consumer fundamentals—such as growing employment, rising real wages and remittances increasing at a healthy pace—continue to suggest that private consumption remained strong in Q2. However, the bad news in the manufacturing sector seems to suggest that economic growth is fragile and underlines the fact that Mexico is unable to sustain significant growth rates. Shortly after the United Kingdom announced that citizens had voted to abandon the EU, Mexico’s Ministry announced MXN 31.8 billion (USD 1.7 billion) in budget cuts in response to expected volatility resulting from Brexit. Unlike the last cut in February, this one will not affect PEMEX and will fall almost entirely on current spending, with the objective of maintaining the government’s fiscal deficit target of 3.0% of GDP this year.

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Mexico Facts

ValueChangeDate
Bond Yield5.96-0.50 %Jul 21
Exchange Rate18.57-0.56 %Jul 21
Stock Market47,365-0.30 %Jul 21

Mexico Economic Growth

July 12, 2016

The Consensus view among analysts is that economic growth will be supported by private consumption this year. However, Mexico’s difficult adjustment to low oil prices and the fact that monetary and fiscal tightening come at a time of softening economic activity are casting a shadow on the outlook. Analysts expect the economy to expand 2.4% this year, which is unchanged from last month’s forecast. Next year, the economy is projected to accelerate to a 2.7% expansion.

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