Itaú BBA - Scenario Review - Mexico

  • Higher inflation, higher interest rates  

    AMLO reduced its political power in Congress

  • Low odds of further rate cuts   

    Nationalistic initiatives in the energy sector persist.

  • Higher U.S. Treasury yields limit space for additional rate cuts  

    A market-unfriendly energy reform was approved by Congress

  • Help from the North   

    Banxico resumed rate cuts

  • Improved activity outlook  

    Start of COVID vaccination campaign

  • Uneven recovery  

    A pause, but not the end of the easing cycle.

  • External demand drives the recovery  

    Cautious monetary policy amid conservative fiscal policy

  • A pause, not an end to the easing cycle  

    Persistent inflation despite weak activity

  • The outlook deteriorates further  

    Easing cycle goes on amid a wide negative output gap

  • Cautious monetary easing continues  

    Further rate cuts ahead are likely.

  • Further monetary policy easing despite worsening fundamentals  

    Limited government response to the outbreak

  • Fed outweighs domestic risks  

    Weaker global economy opens room for a bolder response by Banxico

  • Stagnant economy means easing cycle will continue  

    AMLO achieved responsible fiscal results so far

  • Minimum wage hike prevents a bolder monetary policy response  

    Minimum wage hike risks inflation convergence

  • USMCA approval closer  

    The potential approval of the USMCA in U.S. Congress will help reduce uncertainty in the economy.

  • Weak growth calls for a bolder monetary response  

    We now expect the policy rate to end 2019 at 6.75% (before 7.00%)

  • Frontloading rate cuts  

    A clearer deceleration in core inflation will be key for frontloading the easing cycle

  • The easing cycle begins  

    Responsible fiscal targets, but the risk of fiscal slippage is high

  • A rate cut soon, but not in August  

    Banxico needs to see a larger reduction in core CPI before starting an easing cycle.

  • Monetary easing in turbulent times  

    More uncertainty from the domestic side

  • Trump’s temporary trade war with Mexico  

    New tariff threats cannot be discarded in the future

  • A difficult road to USMCA ratification  

    Healthy public finances in 1Q19, but risks remain

  • Committed to fiscal responsibility, but execution is a risk  

    Further support for PEMEX is expected

  • Policy-Rate cuts in 4Q19  

    After his first 100 days in power, AMLO enjoys strong support

  • Responsible fiscal budget, but execution is a risk  

    Further rate increases can’t be taken for granted

  • AMLO’s government begins  

    Domestic markets were rattled after several radical legislative initiatives emerged.

  • AMLO’s policymaking style  

    Airport referendum results raises concerns of how future policy decisions will be made

  • NAFTA deal closer, but not certain  

    More details about AMLO’s policy direction emerge

  • Hopes of a NAFTA deal amid fiscal policy risks  

    AMLO’s extra spending promises could jeopardize public finance stability

  • Political change as trade wars loom  

    AMLO gains control of congress.

  • Navigating more turbulent waters  

    NAFTA, elections, and external risks intensified

  • A NAFTA deal within reach?  

    We continue to expect that a successful renegotiation of NAFTA will be announced in 2Q18.

  • Setting the stage for a pause  

    We do not expect further interest rate increases.

  • AMLO leads, but the race is not yet over  

    Risks related to Nafta and Elections persist.

  • Domestic and external uncertainties return  

    We have reduced our growth forecast for this year, but revised our inflation forecast up.

  • After the earthquakes  

    Earthquakes pose meaningful risks on activity and fiscal accounts, but not on inflation

  • Fundamentals improve, but politics pose risks  

    Given the solid performance of the economy in 1H17, we have revised our growth forecast for 2017 to 2.3%, from 2% previously.

  • Curbing rate cut expectations  

    Board members agree that rate cuts will not be implemented anytime soon

  • Monetary tightening ends, but easing is distant  

    Board members have contrasting views on the future course of monetary policy

  • Politics in the spotlight  

    Political establishment wins regional elections

  • Resilient to shocks, but inflation prone  

    Growth surprised to the upside, while inflation conditions deteriorated.

  • A brighter outlook  

    Uncertainties over trade relations with the U.S. remain, but have diminished recently.

  • Out of the woods?  

    Mexican peso has been supported by perception of lower protectionism risk and Central Bank intervention

  • The dust is far from settled  

    Uncertainty over bilateral relations with the US is the main risk

  • Aftermath of the “gasolinazo”  

    The liberalization of gasoline prices will be beneficial for the fiscal accounts.

  • Calibrating the monetary policy response  

    Mexico’s economic activity accelerated in 3Q16

  • Facing the Trump fallout  

    The outcome of the U.S. presidential election has weakened Mexico’s economic prospects.

  • A Rally Coming?  

    A potential defeat of Trump would help the peso.

  • Fiscal adjustment in the spotlight  

    Fiscal consolidation disappoints, while the current-account deficit peaks

  • Slowing down amid weaker fundamentals  

    In coming quarters, a rebalancing of growth sources toward firmer manufacturing exports and softer consumption is likely.

  • Tighter fiscal and monetary policies amid slower activity  

    We expect additional interest rate increases in Mexico in 2016 only if exchange-rate depreciation pressures return.

  • Renewed peso volatility  

    As the peso recouples with its fundamentals, additional rate hikes this year are unlikely.

  • Reducing the fiscal deficit  

    While Mexico’s net public debt is rising to less comfortable levels, authorities are taking action to stabilize it.

  • No further rate hikes this year  

    The board would not react automatically to higher interest rates in the U.S.

  • Another victim of cheap oil  

    the decline in oil prices is negatively affecting activity, fiscal revenues, exports and the exchange rate.

  • Growth picking up but challenges remain  

    The slow recovery of U.S. industrial production, the ongoing fiscal consolidation and low oil prices pose important challenges.

  • Higher growth and low inflation in 2016  

    We expect GDP to grow 2.8% in 2016.

  • Less linked to the Fed?  

    We expect the central bank to raise the policy rate only in 1Q16, and after the Fed (in December).

  • A tighter budget  

    Reacting to lower oil revenues.

  • Less impulse from the U.S.  

    We reduced our growth forecast for next year to 2.8% (from 3.0%).

  • Risks for the energy reform  

    The recent further decline in oil prices increases the risks for the coming oil field auctions.

  • Rate hikes only after the Fed  

    We believe that the central bank will start its tightening cycle in 1Q16, once the board has more assurance that the economic recovery is solid enough.

  • No rate hikes this year  

    We now see rate hikes only in 1q16.

  • Lower growth, controlled inflation...and higher interest rates?  

    We expect the hiking cycle in Mexico to start in September, in conjunction with the Fed’s liftoff

  • Before, with or after the Fed?  

    We currently expect Mexico’s central bank to deliver an interest rate hike in June, but there are balanced risks to this forecast.

  • A more conservative fiscal policy  

    The Finance Ministry announced expenditure cuts worth 124 billion pesos, or 0.7% of GDP.

  • Better Days to Come  

    The labor market continues to evolve favorably.

  • Exchange-Rate Intervention Returns  

    The lower dynamism of economic activity led us to reduce our GDP growth forecast to 2.2% from 2.4% previously.

  • The Future in the Spotlight: Oil and Security  

    Mexico’s IGAE (monthly proxy for GDP) came in at 1.3% year over year in August

  • Exports and Private Internal Demand Take Off; Public Sector Lags Behind  

    The demand-side breakdown of the GDP indicated that the external sector was the main engine of growth in 2Q14.

  • Hello recovery, goodbye disappointment  

    The GDP figures for 2Q14 confirmed the recovery of the economy.

  • Congress Approves Energy Reform Bylaws  

    Mexico’s IGAE (monthly proxy for GDP) was weak in May

  • Recovery at Last  

    Mexico’s IGAE (monthly proxy for GDP) recovered in April.

  • An Unexpected Policy Rate Cut  

    Mexico’s economy disappointed during 1Q14.

  • Energy Reform Advances; the Economy, Not So Much  

    Enrique Peña Nieto sent to congress on April 30 the secondary legislation related to the constitutional reform approved in late 2013.

  • Emerging Signs of Recovery  

    The IGAE (monthly GDP proxy) came in at 0.8% year over year

  • Still not Rebounding  

    Recent activity indicators show that the economy has not rebounded yet.

  • A Bumpy Recovery  

    Activity indicators available for 4Q13 show that the recovery seen in the previous quarter was short-lived.

  • A Far-Reaching Energy Reform  

    We do not expect policy rate moves this year, but we see rate hikes in 2015.

  • A Bolder Energy Reform Is Back on the Table  

    A political-electoral bill will likely be approved over the next few days.

  • An Unbalanced Recovery  

    The end of the easing cycle, a successful energy sector reform and the economic recovery will likely support the Mexican peso next year.

  • Fiscal and Monetary Policies Come to Help  

    Mexico's government presented the tax reform bill with its proposed 2014 budget.

  • The Economy Offers a Negative Surprise  

    Enrique Peña Nieto announced the government’s reform proposal for the energy sector.

  • Reforms and Cyclical Rebound Should Sustain Growth in the Short and Medium Run  

    Mexico’s PAN (the largest opposition party) has presented an aggressive energy reform bill.

  • Slower Growth, Weaker Peso and Steady Rates  

    We revised our growth forecast down for this year, to 2.5% (3.2%, previously).

  • No More Cuts  

    Slow public expenditures also reduced growth in 1Q13.

      < Volver