Economics: Not a very bright outlook
In recent weeks officials have been trying to offer an optimistic take on the economic outlook even while admitting to significant risks (Nafta, US fiscal reform and monetary policy, Mexico elections and related market volatility), but the evidence that has emerged during this period shows a weakening of major economic indicators even as inflation remains stubbornly high. Demand indicators are no less encouraging as growth in private consumption decelerated significantly in November (a mere 0.5% m-o-m rise as opposed to the roughly 3.0% rate of growth that had prevailed for most of the year).
Actors are clearly cognizant of such developments, and the central bank's most recent monthly survey of private sector economists showed that on average they had lowered their 2018 GDP growth forecast from 2.24% in December to 2.19% in January.
We at GEA estimate GDP will slow in 2018 (+1.9% e) along with a weakening of almost all aggregate demand components, with the exception of an election-year rise in public consumption alongside a marginal recovery in gross fixed investment, thanks to the sort of rebound that has accompanied each of the past presidential election years. From a sectorial optic, we estimate that in 2018 agriculture will continue to expand, all service components will slow, and the industrial sector will remain essentially flat as the extended contraction of extractive industries slows, construction rebounds and manufacturing decelerates.
The Ministry of Finance's claims that "all is well" with the economy are understandable but not apparent, even before considering the risks the ministry cites. In an election year, there is no hiding the extent to which economic growth is slowing nor the effects of inflation that has failed to recede as fast or to the degree the authorities have been projecting.
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