Mexico: Remittances maintain solid pace of growth at the outset of the year
March 1, 2017
Remittances totaled USD 2.1 billion in January, which marked a 6.3% expansion from the same month last year. The increase followed a 6.2% expansion in December and was on par with market expectations. That said, the result came in below the 8.8% average growth rate that remittances registered in 2016 as a whole, which brought transactions’ total value to a record USD 27.0 billion.
Analysts continue to suggest that the healthy pace of growth in remittances is due to the ongoing strengthening of the U.S. labor market at a time when transaction costs are low. Also, Mexican workers abroad likely continued to take advantage of a weak peso to boost the value of their U.S. dollar remittances and may well have frontloaded them on concerns about the implementation of measures that could hinder future transactions by the new U.S. administration.
Although the U.S. labor market remains tight, most of the drivers of the current healthy growth in remittances are transitory. As these forces dissipate, it is likely that remittances will cool in the coming months. At any rate, remittances will continue to be supportive of private consumption and the financing of external accounts since they continue to provide the third main source of Mexico’s foreign currency, after oil exports and tourism.
Author: Ricardo Aceves, Senior Economist