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Mexico Economic Forecast

Mexico Economic Outlook

The economy expanded 0.5% quarter on quarter in Q4 according to a second data release, marginally above the flash estimate. Rebounds in the mining and construction sectors supported growth. However, manufacturing and retail trade slipped into contraction, and the business support services subsector continued its decline, potentially due to the ongoing impact of 2021’s labor outsourcing ban. Turning to 2023, activity likely continues to grow. Both the manufacturing and non-manufacturing PMIs were in expansionary territory in January–February. In January, car exports surged, while consumer confidence rose to an over one-year high and remittances increased by double digits, boding well for private spending. That said, Banxico’s ongoing aggressive tightening cycle—the Bank hiked by 50 basis points in February despite a softer hike from the Fed—will be containing momentum.

Mexico Inflation

Inflation fell from 7.9% in January to 7.6% in February, but remained above the Central Bank’s 2.0–4.0% target range. Panelists see inflation declining steadily in the coming quarters on a tough base of comparison, restrictive monetary conditions and milder external price pressures, but staying above target throughout the year.

Mexico Economic Data

2017 2018 2019 2020 2021
Population (million) 124 125 127 128 129
GDP (USD bn) 1 1 1 1 1
GDP per capita (USD) 9 9 10 8 9
GDP (MXN bn) 21 23 24 23 25
Economic Growth (Nominal GDP, ann. var. %) 9.0 7.2 3.9 -4.2 10.1
Economic Growth (GDP, ann. var. %) 2.1 2.2 -0.2 -8.0 4.7
Domestic Demand (ann. var. %) 1.9 2.1 -1.1 -11.2 7.7
Private Consumption (ann. var. %) 3.2 2.6 0.4 -10.3 7.6
Government Consumption (ann. var. %) 0.7 2.9 -1.8 -0.3 -0.6
Fixed Investment (ann. var. %) -1.2 0.8 -4.7 -17.7 10.5
Exports (G&S, ann. var. %) 4.2 6.0 1.5 -7.3 7.1
Imports (G&S, ann. var. %) 6.4 6.4 -0.7 -13.7 15.6
Industrial Production (ann. var. %) -0.2 0.4 -1.8 -9.4 5.4
Retail Sales (ann. var. %) -0.3 1.6 2.1 -9.2 7.8
Unemployment (% of active population, eop) 3.1 3.4 2.9 3.8 3.5
Unemployment (% of active population, aop) 3.4 3.3 3.5 4.4 4.1
Fiscal Balance (% of GDP) -1.1 -2.1 -1.6 -2.9 -2.9
Public Debt (% of GDP) 46.9 46.8 46.7 53.1 52.3
Inflation (CPI, ann. var. %, eop) 6.8 4.8 2.8 3.2 7.4
Inflation (CPI, ann. var. %, aop) 6.0 4.9 3.6 3.4 5.7
Banxico Target Rate (%, eop) 7.25 8.25 7.25 4.25 5.50
TIIE 28 Days Rate (%, eop) 7.62 8.60 7.56 4.48 5.72
10-Year Bond Yield (%, eop) 7.65 8.69 6.86 5.47 7.55
Exchange Rate (MXN per USD, eop) 19.57 19.69 18.88 19.93 20.47
Exchange Rate (MXN per USD, aop) 18.91 19.24 19.25 21.49 20.29
Current Account Balance (USD bn) -22.0 -26.1 -5.6 22.8 -8.2
Current Account Balance (% of GDP) -1.9 -2.1 -0.4 2.1 -0.6
Merchandise Trade Balance (USD bn) -11.0 -13.6 5.4 34.2 -10.9
Merchandise Exports (USD bn) 409 451 461 417 495
Merchandise Imports (USD bn) 420 464 455 383 506
Merchandise Exports (ann. var. %) 9.5 10.1 2.2 -9.4 18.6
Merchandise Imports (ann. var. %) 8.6 10.4 -2.0 -15.9 32.0
Foreign Direct Investment (USD bn) 34 - 35 28 31
Remittances (USD bn) 30.3 33.7 36.4 40.6 51.6
International Reserves (USD bn) 173 175 181 196 202
International Reserves (months of imports) 4.9 4.5 4.8 6.1 4.8
External Debt (USD bn) 576 596 618 620 599
External Debt (% of GDP) 49.7 48.7 48.6 56.9 47.1

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