Recently published research from Business Monitor International, "Mexico Business Forecast Report Q4 2013", is now available at Fast Market Research
Boston, MA -- (SBWIRE) -- 08/21/2013 -- We remain optimistic toward Mexico's long-term growth outlook on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics. That said, we believe that the ability for Mexico to reverse its severe macroeconomic imbalances and generate the robust growth necessary to propel it to 'developed market' status still hinges on the passage of substantive energy sector reform.
We continue to expect Mexico to end 2013 with a policy rate of 4.00%. While the Banco de Mexico (Banxico) reduced the policy rate by 50 basis points in March, slightly earlier than we had initially expected, the accompanying communique stipulated that it was a 'one-off' cut. Moreover, with inflation having climbed above Banxico's target band, we see little chance for further easing in the short term.
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Major Forecast Changes
While we continue to expect the economy will slow in 2013 on the back of moderating external demand, with the manufacturing sector struggling to gain traction, and potential for a weaker peso to weigh on consumer spending, we have revised down our real GDP growth forecast from 3.6% to 3.0% for 2013.
We have revised our peso forecast from MXN12.30/US$ to MXN12.70/ US$. While we continue to believe that a number of factors, including a possible ratings upgrade and the passage of crucial economic reforms, could bolster investor sentiment, with the US Federal Reserve now hinting that it will begin tapering quantitative easing in H213, this will have a depreciatory impact on the peso, especially with shortterm capital inflows still comprising by far the largest proportion of financial account flows.
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