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A lower energy goods deficit outweighed softer remittances.
2023/11/24 | Julio Ruiz

The current account balance stood at a surplus of USD 2.6 billion in 3Q23, below our forecast of a surplus of USD 4.5 billion, but closer to market expectations of a surplus of USD 2.8 billion (as per Bloomberg). As a result, the 4-quarter rolling current account balance stood at a deficit of USD 11.3 billion or 0.7% of GDP (from a deficit of 1.3% of GDP in 2Q23 and a deficit of 1.2% of GDP in 2022). Also on a 4-quarter rolling basis, the improvement in the current account was driven by a smaller energy goods trade deficit of 1.4% of GDP in 3Q23 (from a deficit of 2.0% of GDP in 2Q23) which more than compensated smaller remittances from abroad of 3.7% of GDP (from 3.8% of GDP and a 4.0% of GDP in 2022). On the financing side, net direct investment came in at 1.5% of GDP in 3Q23 (down from 1.9% of GDP in 2Q23). Net portfolio flows registered outflows of 0.4% of GDP in 3Q23 (from inflows of 0.1% of GDP in 2Q23), which resulted from Mexicans divesting 0.1% of GDP (from a divestment of 0.5% of GDP), while foreigners sold domestic assets totaling 0.5% of GDP (practically unchanged from the previous quarter). Foreign inflows to domestic government bonds were 0.2% of GDP in 3Q23 (from 0.1% in 2Q23), also on a 4-quarter rolling basis.


Our take:  We expect the current account deficit to narrow from 1.2% of GDP in 2022 to 0.6% of GDP in 2023, supportive for the MXN. Lower oil prices (relative to last year) will help to reduce the energy goods trade deficit which will likely be mitigated by softer remittances as the U.S. economy slows.

Julio Ruiz