Research Dept. News
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Monthly Report, num 359 - July-August 2012
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International review - Mexico
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Mexico: changing times?
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The strength of domestic expenditure protects the Mexican economy from the global slowdown.
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The breakdown by GDP component for the first quarter of 2012 confirms that the recent dynamism of Mexico's economy comes from renewed strength in domestic expenditure. Private consumption was the area that contributed the most to economic growth (2.9 percentage points), with year-on-year growth of 4.3%, followed by gross fixed capital formation, which contributed 1.9 percentage points to the growth in GDP and increased by 8.6% compared with the first quarter of 2011. Public expenditure advanced by 2.9%. Exports recorded growth of 5.1% while imports rose by 8.1%. In net terms, exports deducted 0.6 percentage points from growth.
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The peso, however, is at the mercy of the turbulences.
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In spite of the good rate of economic growth, prices continue to rise moderately. Although the weak peso, resulting from the problems in Europe, is expected to introduce some inflationary pressure, it is also predicted that the world slowdown in economy and particularly in the United States will end up affecting the domestic economy, pushing down this pressure. This has been endorsed by the decision taken by the Monetary Policy Committee to keep official interest rates at the same rate for another month, albeit explicitly changing the tone of their position from pro-expansion to neutral.
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More than just changes in posture are expected from the government. At the time of writing this report, just a few days before the presidential elections, Enrique Peña Nieto (PRI) looked like being the new President of Mexico. The polls also suggest that he more than likely won't be able to govern alone, so he will have to secure the opposition's support to promote the reforms required by the Mexican economy in order to gain in solidity and guarantees for the future.
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