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Mexico Country Risk Report Q2 2018

Mexico Country Risk Report Q2 2018

Executive Summary

Core Views

Economic growth in Mexico will accelerate modestly in 2018 to 2.1%, from 2.0% in 2017, supported by oil production gains and resiliency in the manufacturing and service sectors.

Investment growth will remain weak, capping economic growth, amid rising uncertainties surrounding a potential breakdown of NAFTA renegotiations and the upcoming presidential election.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Modest Uptick In Growth Amid Mounting Risks
Economic growth in Mexico will accelerate modestly in 2018, supported by oil production gains and resiliency in the manufacturing
considerable downside risks to growth stemming from NAFTA renegotiations and the upcoming presidential election
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
NAFTA Update: Lack Of Progress Puts Deal In Increasing Jeopardy
A lack of progress in renegotiations, increasingly stringent demands from the US, and the tight timeline set by negotiators, make it
increasingly likely that the North American Free Trade Agreement (NAFTA) will collapse
Outlook On External Position
TABLE: TOP 5 GOODS EXPORTS IN 2016
TABLE: TOP 5 GOODS IMPORTS IN 2016
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
Banxico will likely extend its rate hiking cycle into 2018 with an additional 25bps hike at its February meeting in response to rising
new central bank governor Alejandro Diaz de Leon
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Consolidation Set To Continue
The government of Mexican President Enrique Pena Nieto will continue budget consolidation efforts in 2018, aided by an upward
trend in revenues. However, NAFTA renegotiations and July 2018's presidential election loom as potential threats to Mexico's budget
Structural Fiscal Position
TABLE: MAIN SOURCES OF FEDERAL REVENUE & EXPENDITURE
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
MXN: Strong Fundamentals, But Risks Abound
The Mexican Economy To 2027
Mexico's growing manufacturing sector, solid private consumer and favourable demographics suggest that the country is well placed to
see steady economic expansion over the coming decade. We expect Mexico's oil sector to become an increasingly important driver of
growth, following energy sector liberalisation in December 2013
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Crib Sheet: AMLO Early Favourite As Field Takes Shape
The July 2018 general election will heighten political tensions as anti-establishment sentiment bolsters the bid of leftist populist Andrés
been weakened by uncertainty surrounding ongoing NAFTA renegotiations
TABLE: POLITICAL OVERVIEW
Security And Corruption To Remain Key Risks
The next decade looks set to be challenging for Mexico owing to a weak security situation, high levels of income inequality and endemic
corruption. That said, our core view remains that the country will end the decade in a better position than where it started
Chapter 4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
TABLE: MAIN ACTIVE TERRORIST GROUPS
TABLE: POLITICAL VIOLENCE RISK
TABLE: BUSINESS RESPONSE TO CONFLICT RISK
Transport Network
TABLE: ROAD RISKS
TABLE: RAIL RISKS
TABLE: PORTS AND INLAND WATERWAY RISKS
TABLE: AIR TRANSPORT RISKS
Chapter 5: BMI Global Macro Outlook
EM Growth To Accelerate In 2018 While DMs Plateau
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES ’ REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS ’ REAL GDP GROWTH, % y-o-y

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