2013-01-01 14:05:52 - Mexico Business Forecast Report Q1 2013 - a new country guide report on companiesandmarkets.com

We have turned increasingly optimistic toward Mexico´s long-term growth outlook, raising our average real GDP growth forecast for 2012-2022 from 3.3% to 4.0% on the back of Mexico´s booming manufacturing sector, increasingly strong private consumer and favourable demographics. That said, we believe that the ability for Mexico to reverse its severe macroeconomic imbalances and generate the robust growth necessary to propel it to ´developed market´ status still hinges on the passage of substantive energy sector reform.

Though the Mexican peso will remain subject to substantial global market volatility, we expect the unit to appreciate modestly over the coming 12 months, maintaining our forecast for the peso to average MXN13.05/US$ in 2012 and MXN12.80/US$ in 2013. US markets look set to remain

 

 

on a generally upward trajectory over the coming year following QE3, and investment and short-term capital inflows are likely to be robust given the country´s improving macroeconomic fundamentals.

Cartel activity will continue to weigh on growth for the foreseeable future, though we believe the situation is likely to improve in the long term.

Major Forecast Changes

We are revising up our 2012 real GDP growth forecast slightly, from 3.8% to 4.0% to take into account stronger-than-anticipated export growth in H112, though maintain our view for a slowdown in coming quarters, still forecasting 3.4% real GDP growth in 2013.

Key Risks To Outlook

Supply-side shocks, including elevated grains prices and high egg prices from a recent outbreak of avian have seen inflation continue to come in well above the Banco de México´s 2.0%-4.0%. While we expect that these pressures will subside in coming months, forecasting that inflation peaked in September, we see rising risks that the elevated grains prices may feed through to higher livestock prices in coming month. This presents a strong uptick risk to our dovish monetary policy forecast for 2013.

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