Itaú BBA - AMLO dealing with his first troubles

Scenario Review - Mexico

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AMLO dealing with his first troubles

February 8, 2019

Banxico on hold, rate moves unlikely soon


For the full version with all charts and tables, please open the attached pdf file
 

• AMLO is now facing his first difficulties. These are related to gasoline shortages (due to a strategy to fight fuel theft), strikes in manufacturing firms and railways blockades, which will likely disrupt economic activity in the beginning of the year. 

• The Ministry of Finance’s (MoF) measures to strengthen PEMEX’s financial position weren’t enough to avoid a two-notch downgrade by a rating agency. The government then announced that it is planning additional measures to support the state-owned company. 

• We expect economic activity to slow to 1.7% this year (from a preliminary estimate of 2.0% in 2018) as uncertainty still hangs over domestic policy direction and approval of USMCA by the U.S. Congress. Deceleration in the U.S. economy will also curb growth.

• We expect Banxico to keep the policy rate unchanged throughout this year. However, considering the high level of uncertainty over domestic policy direction and over the approval of the USMCA in the U.S. congress, we continue to think that rate hikes this year are more likely than cuts.
 

João Pedro Bumachar
Julio Ruiz

 

For the full version with all charts and tables, please open the attached pdf file



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