Follow the leader: Mexico hurt by U.S. slowdown (original) (raw)

Mexico Consensus Economic Forecast, Volume 18, Number 1

2015

Brother, Can You Spare a Dollar? Real GDP grew by 2.6 percent in the last quarter of 2014 compared to one year earlier. Though still relatively modest, it was the largest year-over-year increase in quarterly GDP reported since the end of 2012. The consensus forecast for real GDP growth in 2015 is 2.9 percent. Consumer confidence remains subdued amid political scandals and currency market volatility. Growth in manufacturing and other key sectors may, however, help boost consumer spending later this year. The consensus forecast calls for a moderate 2.7 percent increase in private consumption. Low oil prices will strain government budget plans in 2015. This, together with ongoing economic stimulus efforts, contributes to uncertainty regarding future growth in government consumption. Forecasts in this category span a wide range and average 3.6 percent. Growth in total investment spending has faltered over the last two years. Most panelists predict that spending in this category will recover in 2015. A rebound in the construction sector is driving expectations of increased total investment, which is forecast to grow at 4.1 percent. While the drop in oil prices hurts Mexico as an oil exporter, improving economic activity in the United States and a weak peso are likely to stimulate exports of manufactures. Exports are expected to grow by 4.8 percent in 2015. Similarly, a 4.9 percent rise in imports is expected. Most panelists expect that inflation will remain under control in a context of still unimpressive economic growth and low energy prices. All of the panelists predict lower inflation in 2015 than what was observed in 2014. The consensus inflation forecast is 3.3 percent. The consensus exchange rate forecast for 2015 is 14.3 pesos per dollar. This figure reflects a marked depreciation of the peso relative to last year's average value. However, it also suggests that the nominal value of the peso will recover substantially relative to its current trading range. One of the factors behind the peso depreciation is the expectation of higher interest rates in the United States. In this context, interest rates in Mexico are also expected to edge upward this year. The consensus forecast for the yield on 28-day CETES in 2015 is 3.4 percent. In general, panelist forecasts for 2016 are slightly more optimistic than the 2015 forecasts. Real GDP is expected to grow by 3.1 percent next year. Private and government consumption are predicted to grow by 3.0 and 3.4 percent, respectively. The recovery in total investment is projected to continue into 2016, with 4.5 percent growth predicted for that category. The 2016 consensus forecast calls for stronger growth in international trade. Exports are forecast to grow by 5.6 percent and imports by 5.7 percent. The 2016 inflation forecast is 3.5 percent. The predicted average exchange rate is 14.26 pesos per dollar, which is very close to the exchange rate forecast for the current year. In light of expected improvements in overall economic conditions, somewhat higher interest rates are expected for 2016. The predicted yield on 28 Day CETES is 4.0 percent.

Mexico Consensus Economic Forecast, Volume 22, Number3

2019

Multiple economic challenges ranging from a weak peso to trade disputes with the United States were encountered during 2018. With many unanswered policy questions still hovering over the economy, the 2019 consensus GDP growth forecast has been revised downwards to 2.2 percent. Individual forecasts range from 1.9 percent to 3.1 percent. Private consumption still leads the way in 2019 with a 2.7 percent rate of increase projected for 2019. That rate represents a slower rate of growth than what the panelists collectively anticipated last quarter. Consumer confidence likely remains strong following the AMLO and Morena victories at the polls last July. The consensus outlook for Government consumption is 2.2 percent in 2019. There is a wider spectrum of forecasts for this variable than others, ranging from a low of 1.0 percent to a high of 3.8 percent. Part of the uncertainty stems from questions over how many large scale expenditure changes will eventually be introduced by the new government.

WP / 91 / 12 INTERNATIONAL MONETARY FUND Research and Western Hemisphere Departments Interest Rates in Mexico : The Role of Exchange Rate Expectations and International Creditworthiness Prepared

2005

This paper explores how interest rates on domestic financial assets in Mexico are linked to expectations of exchange rate changes and to perceptions about the default risks contained in Mexico's external debt. It is shown that the interest rate differentials between pesoand U.S. dollar-denominated domestic assets reflected some concerns about the exchange rate policy during the period under study. In addition, the evidence suggests that the interest rate on a U.S. dollardenominated Mexican domestic asset is linked (i.e., cointegrated) to the yield implicit in the secondary market price for external debt issued by Mexico. JEL Classification Numbers: 121, 431, 212 *This paper has greatly benefitted from comments by Charles Adams, Sterie T. Beza, Mohamed El-Erian, Robert Flood, Eliot Kalter, Claudio Loser, J. Saul Lizondo and Donald J. Mathieson. Conversations with Guillermo Calvo, Michael Dooley, Peter Garber, and Sweder van Wijnbergen, also helped to clarify some of the issues. S...