Research Dept. News
|
|
|
|
Monthly Report, num 331 - January 2010
|
|
|
International review - Mexico
|
|
|
|
|
Mexico: goodbye 2009...welcome 2010!
|
|
Mexico views 2010 with more optimism.
|
|
In all probability, 2009 will be remembered in Mexico as a bad year and not just because of the H1N1 'flu epidemic but also due to the poor performance of a Mexican economy, which has suffered more than most from the ravages of the worldwide economic crisis and is preparing itself for a fall in GDP of more than 7%. Fortunately, and although Mexico has a number of structural reforms still pending which, if they are not carried out, may complicate its economic future more in the long term, the forecasts for 2010 are much more encouraging thanks particularly to the steady drip of positive news from the north.
|
|
The pace of recovery is expected to be moderate.
|
|
This is true even having accumulated, in a few weeks, two downgrades in its sovereign debt rating. Both Fitch and S&P attributed their respective decisions to Mexico's excessive dependence on oil as public revenue, its excessive dependence on events in the United States and the impact of the economic and financial crisis of the last year. However, both agencies maintained the degree of investment and changed its outlook to stable. This might be why this downgrading has had a limited effect to date and has not reversed the growing optimism that is gradually taking root in Mexico.
|
|
|
|
As the signs of recovery become consolidated both within and outside its borders, economic sentiment is also expected to improve. In this respect, although leading indicators anticipate that this recovery, although premature, will advance in the coming months, its relative anaemia also suggests its pace will be moderate. So, while in November Mexican consumer confidence picked up slightly from its record low in October and business sentiment returned to the levels of fourteen months before, both retail sales and gross fixed investment continue to fall. Similarly, the IMEF manufacturing index in November stood at 52.6 points, an increase in year-on-year terms but a slight reversal compared with the previous month. In spite of this, it's still above the threshold of 50 points that indicates expansion and its non-manufacturing equivalent did continue its rise of the last six months.
|
|
A surprising rise in the balance of trade.
|
|
Continuing on this positive note, one of the most encouraging figures from the last month was the upswing in October's balance of trade with exports reaching their highest level for the last twelve months, while imports continued to lag behind due to the weakness in domestic demand, heavily affected by the crisis. Furthermore, although both manufacturing and industrial production continued to fall compared with the previous year, by 5.2% and 5.9% respectively, they did so at their slowest rate for 12 months, partly explained by the upswing in automobile production, rising for the first time in 2009 (2.9% year-on-year). On the other hand, and surprisingly, unemployment fell slightly in October, down 6%, although this does not mean that the recovery in employment will be any less slow or dependent on the reactivationof the world economy.
|
|
|
|
Given this scenario of incipient recovery and anticipating the forthcoming tax rise contained in the recently approved fiscal reform, Banxico upped its inflation forecasts for 2010. In any case, and particularly now there is a change in leadership at the Bank, changes in monetary policy are not expected until the second half of 2010, even though they may be desirable if recovery is weaker than predicted. On the other hand, although the Mexican government has promised to sort out the structural weaknesses pointed out by rating agencies, no substantial changes are expected in this area either although... in this case change would definitely be desirable.
|
|
|
You can susbcribe now to be nofified by email every time the Monthly Report is updated in the internet.
|
All documents are in Adobe Acrobat format (PDF).
To view a document in PDF format you need the Adobe Acrobat Reader. If you don’t have it already loaded on your computer, you can donwload it now.
|
|
Direct link to the Research Dept. in your mobile
We'll send you a free SMS with the link
|
