Mexico: One More Thing to Worry About in 2018
|Executive Summary
The Mexican economy is facing a very tough environment in 2018, with still high inflation and interest rates, combined with a weak investment environment and several risks on the political front. As the country approaches the July 1st presidential election, where most polls today suggest Andres Manuel López Obrador will come out the winner, risks of isolationist economic policies are on the rise, which could bring economic reforms back several decades. Although economic activity strengthened somewhat in the final quarter of 2017, we are still concerned that the increased uncertainty in the country’s political future, and the unfinished renegotiation of the North American Free Trade Agreement (NAFTA) could continue to put downward pressure on economic activity this year.
Q1 GDP Improves a Bit, but Concerns Remain
According to the “flash” release of the performance of the Mexican economy in Q4-2017, the economy improved a bit in the last quarter of the year, up 1.0 percent, sequentially and not annualized. On a year-earlier basis, the economy grew 1.8 percent non-seasonally adjusted (Figure 2). This means that the Mexican economy grew 2.1 percent for the whole of 2017. We had forecasted growth of 2.0 percent in 2017, after reversing our original call which accounted for a slight recession due to the increased risks of the United States abandoning the NAFTA, among it Canada and Mexico.
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