Five reasons why Mexico’s recovery will disappoint

There are five key headwinds to Mexico’s economy, including high inflation and shortages in the auto sector, which suggest to us that the recovery will disappoint expectations from here. We now forecast below-consensus GDP growth of 6.0% in 2021 and 2.8% in 2022 (previously 6.5% and 3.5%). This feeds into our view that Banxico will end its tightening cycle sooner than investors currently anticipate.
Nikhil Sanghani Emerging Markets Economist
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Latin America Economics Weekly

New face at Banxico, Chile election wrap-up

The unexpected change in the nomination for Banxico’s next governor, to Victoria Rodríguez from Arturo Herrera, hit investor confidence but we don't think this switch alters the outlook for Banxico’s gradual tightening cycle. Meanwhile, investors initially cheered the result of Chile’s first-round presidential election but with political risks unlikely to fade soon, and copper prices set to fall further, we see little upside in Chilean local markets from here. Drop-In: Why is Asia sitting out the global inflation surge? 09:00 GMT/17:00 HKT, Thursday 2nd December https://event.on24.com/wcc/r/3546145/A9D34EF592141BEFCAC819ADB40359D5?partnerref=report

26 November 2021

Latin America Economics Update

Unpacking the oddities in Mexican GDP

The final estimate of Mexican Q3 GDP data was revised down to a 0.4% q/q fall (original -0.2% q/q), but the breakdown showed the contraction was almost entirely due to an outsourcing law that hit services output. Regardless of this statistical quirk, Mexico’s recovery will remain one of the weakest in the region.

25 November 2021

Latin America Data Response

Brazil IPCA-15 (Nov. 2021)

The Brazilian inflation reading of 10.7% y/y in mid-November (the same as the October full month figure) provides the first sign that inflation is now stabilising. But with the headline rate still far above target and fiscal risks persisting, it looks more likely than not that Copom will raise the Selic rate in a larger 175bp step (to 9.50%) when it meets next month.

25 November 2021

More from Nikhil Sanghani

Latin America Economics Weekly

Mexico & Colombia hike but tightening cycles to differ

Central banks in Mexico and Colombia raised their policy rates by 25bp yesterday and more rate hikes are in the pipeline in both economies. The pace of tightening will remain gradual in Mexico but, similar to elsewhere in the region, the tightening cycle in Colombia will probably shift into a higher gear soon.

1 October 2021

Latin America Economics Weekly

Evergrande fallout on Lat Am, Peronist infighting

Fears over Chinese property giant Evergrande rocked global markets earlier this week and Latin American economies, particularly Chile and Peru, are among the most exposed in the world to problems in China’s construction sector. This underlies our view that external conditions are becoming a growing headwind to recoveries across the region. Otherwise, while there are growing fears in Argentina that firebrand Vice President Cristina Kirchner is taking over the reins, it seems that these concerns are overdone, at least for as long as the relatively moderate Economy Minister, Martín Guzmán, remains in office.

24 September 2021

Latin America Data Response

Mexico Bi-Weekly CPI (Sep.)

The renewed rise in Mexican headline and core inflation in the first two weeks of September, to 5.9% y/y and 4.9% y/y respectively, ensures that Banxico will continue its tightening cycle at its meeting next week. But we still think it will move slowly, with another 25bp hike to 4.75%.

23 September 2021
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