Itaú BBA - Responsible fiscal budget, but execution is a risk

Scenario Review - Mexico

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Responsible fiscal budget, but execution is a risk

enero 10, 2019

Further rate increases can’t be taken for granted


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

• AMLO is committed to fiscal responsibility, but implementation of the fiscal targets is challenging, given his social and economic programs and drags on economic activity (U.S. slowdown and uncertainties over domestic policy direction). 

• As expected, the minimum wage increased 16% at the national level and 100% in cities close to the northern border (only in 43 municipalities). Gasoline prices will not be allowed to increase by more than inflation (despite an increase of more than 4% in the excise tax for 2019). 

• We estimate economic activity grew 2.0% in 2018. Looking forward, we expect a GDP slowdown to 1.7% as uncertainty over domestic policy direction affects investment and a deceleration in the U.S. economy curbs exports.

• We expect one additional interest rate hike (bringing the policy rate to 8.5%) in 1Q19. However, the minutes of the most recent decision do not indicate that board members see the need for further tightening, given the current data. 

João Pedro Bumachar
Julio Ruiz

 

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



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