The current account balance stood at a deficit of USD 14.3 billion in 1Q23, worse than market expectations of a deficit of USD 9.2 billion (as per Bloomberg). As a result, the 4-quarter rolling current account balance stood at a deficit of USD 19.7 billion or 1.3% of GDP (practically unchanged from 2022). While the balance of good and services improved in 1Q23 (also on a 4Q-rolling basis) to a deficit of 2.8% of GDP (from a deficit of 3.0% of GDP in 2022), secondary income (mainly worker’s remittances, which have been an important support for the CAB) are starting to cool down slowly, falling to 4.0% of GDP (from 4.1% of GDP). Primary income also deteriorated to a deficit of 2.5% of GDP in (from a deficit of 2.4% of GDP). At the margin, our seasonally adjusted and annualized measure of the current account balance registered a deficit of 0.5% of GDP in 1Q23 (from a deficit of 1.4% of GDP 4Q22).
Also on a 4Q-rolling basis, net direct investment came in at 1.5% of GDP in 1Q23 (practically unchanged from 2022). Net portfolio flows were balanced in 1Q23 (from outflows of 0.4% of GDP in 2022), which resulted from Mexicans divesting 0.5% of GDP (from a divestment of less than 0.1% of GDP), while foreigners sold domestic assets totaling 0.5% of GDP (from 0.4% of GDP). Foreign inflows to domestic government bonds were 0.2% of GDP in (practically unchanged from the previous year).
Our current account deficit forecast for 2023 is at a low 0.9% of GDP, supporting the MXN. We expect a trade goods deficit (but narrow) this year dragged by soft manufacturing exports (due to weaker external scenario) but mitigated by a slower growth of non-energy imports as internal demand decelerates. Remittances are also likely to soften amid a weaker U.S. outlook.