High remittances mitigated the worsening of the trade goods balance
The current account balance stood at surplus of USD 4.6 billion in 4Q22, above market expectations of a surplus of USD 3.4 billion (as per Bloomberg). As a result, the 2022 current account balance stood at a deficit of USD 13.4 billion or 0.9% of GDP (from a deficit of 0.6% of GDP in 2021). The deterioration in the current account deficit, in 2022 relative to 2021, is explained by a worsening of the trade goods deficit to 1.9% of GDP in 2022 (from a deficit of 0.9% of GDP in 2021) dragged by both - the energy and non-energy trade goods balances. High secondary income balance (mainly worker’s remittances) which stood at 4.1% of GDP in 2022 (practically unchanged from 2021, but significantly above pre-pandemic level in 2019 of 2.8% of GDP) mitigated the worsening of the trade goods balance. Services trade deficit stood at 1.0% GDP in 2022, while primary income stood at a deficit of 2.1% of GDP. At the margin, our seasonally adjusted and annualized measure of the current account balance registered a deficit of 0.7% of GDP in 4Q22 (from a deficit of 1.6% of GDP 3Q22).
Net direct investment came in at 1.6% of GDP in 2022 (from 2.6% of GDP in 2021). Net portfolio outflows fell to 0.4% of GDP in 2022 (from 3.3% of GDP in 2021), which resulted from Mexicans divesting assets from abroad in less than 0.1% of GDP (from an investment of 1.8% of GDP), while foreigners sold domestic assets totaling 0.4% of GDP (from 1.5% of GDP). Foreign inflows to domestic government bonds were 0.2% of GDP in 2022 (from outflows of 1.1% of GDP in 2021).
We expect the current account balance to deteriorate this year to a deficit of 1.5% of GDP. A softer external scenario will likely keep a deficit (but narrow) in the trade goods balance as manufacturing exports growth is curbed. Remittances are also likely to soften amid a weaker U.S. outlook.