The current account balance stood at a surplus of USD 11.7 billion in 4Q23, above our forecast of a surplus of USD 2.7 billion and market expectations of a surplus of USD 5.0 billion (as per Bloomberg). As a result, the 2023 current account balance stood at a deficit of USD 5.7 billion or a deficit of 0.3% of GDP (from a deficit of 1.2% of GDP in 2022). The narrowing of the current account deficit, 2023 relative to 2022, is explained mainly by a smaller energy goods trade deficit of 1.0% of GDP in 2023 (from a deficit of 2.4% of GDP in 2022) which more than compensated smaller remittances from abroad of 3.5% of GDP (from 4.0% of GDP in 2022). Trade goods, services and secondary income balances remained practically unchanged. On the financing side, net direct investment came in at 1.6% of GDP in 2023 (practically unchanged from 2022). Net portfolio flows registered outflows of 0.6% of GDP in 2023 (from outflows of 0.3% of GDP in 2022), which resulted from Mexicans investing abroad 0.3% of GDP (from 0.0% of GDP), while foreigners sold domestic assets totaling 0.4% of GDP (practically unchanged from 2022). Foreign inflows to domestic government bonds were 0.1% of GDP in 2023 (from 0.2% in 2022).
Our take: We expect a still narrow current account deficit of 0.7% of GDP in 2024, supportive for the MXN. A still favorable external demand and stable energy prices will support the trade goods balance. On the other hand, remittances are likely to fall further this year, converging to pre-pandemic levels of around 3.0% of GDP.
