Mexico’s economy should sustain modest growth in 2018

Subject

Mexico economy update.

Significance

Economy Secretary Ildefonso Guajardo admitted on February 8 that uncertainty over NAFTA renegotiation was harming investment, reportedly telling Reforma that businesspeople were questioning why they should move forward if the rules of the game were not yet clear. Fears of economic upheaval undoubtedly contributed to Mexico’s modest 2.1% growth in 2017. The economy nevertheless performed better than expected, with many of the fears stoked by US President Donald Trump’s anti-Mexican rhetoric failing to materialise. Those have not yet subsided, but the economy enters 2018 in a reasonably good state.

Impacts

• Even if inflation eases and growth stabilises, monetary policy will be restricted; US tax reforms could weaken the peso.
• An AMLO election win would stretch uncertainty well into 2019, until a clearer picture of his intentions emerges.
• Whoever becomes president will inherit an economy struggling with low oil prices, and a political scene marred by social tension.