MEXICO – A wide current account surplus in 2Q21

A lower trade services deficit supported the improvement

Julio Ruiz


The current account surplus widened in 2Q21. The current account balance stood at a surplus of USD 6.3 billion in 2Q21, above our forecast of a deficit of USD 0.5 billion and market expectations of a surplus of USD 3.8 billion (as per Bloomberg). As a result, the 4-quarter rolling balance stood at a surplus of USD 35.1 billion or 2.9% of GDP in 2Q21, wider than the surplus of USD 28.0 billion or 2.6% of GDP in 1Q21. The improvement in the CAB, also using 4-quarter rolling figures, is explained mainly by a lower trade services deficit (1.1% of GDP in 2Q21, from 1.3% of GDP in 1Q21), while the trade goods balance and secondary income surplus (mainly remittances) remained practically unchanged at 2.7% of GDP and 3.7% of GDP, respectively. At the margin, our seasonally adjusted measure of the current account balance in 2Q21 stood at 1.0% of GDP (from a surplus of 0.7% of GDP 1Q21), meaning a much narrower result than the four-quarter rolling one.

Using 4-quarter rolling figures, net direct investment stood at 1.8% of GDP in 2Q21 (practically unchanged from the 1Q21). In turn, net portfolio outflows decreased to 1.4% of GDP in 2Q21 (from 1.7% of GDP in 1Q21), which resulted from Mexicans investing 1.4% of GDP abroad (from 1.9% of GDP), while foreigners registered a null investment (from 0.2% of GDP). Foreign outflows from domestic government bonds were 0.3% of GDP in 2Q21 (from a divestment of 1.0% in 1Q21), also on a 4-quarter rolling basis.  

We expect the current account balance (CAB) to remain positive this year, although narrower than last year (CAB of 0.6% of GDP, from 2.4% of GDP in 2020). As current account surplus during the second half of 2020 averaged more than 5% of GDP, the expected surplus for this year will likely narrow substantially from the current 4-quarter rolling figure. In any case, external accounts remain solid, which combined with higher interest rates should benefit the Mexican peso.

Julio Ruiz