Guadalajara -
In a sharp departure from statements it made just five months ago, Mexico's central bank, Banixco, warned yesterday that the national economy is experiencing "significant deceleration." Matters may get worse before they get better, said the bank, which blamed reduced domestic growth on "uncertainties in the external environment."
The latter is a clear reference to continued European economic woes, particularly in Spain and Portugal, and a yet wobbly U.S. economy. The Dow Jones industrial average lost 550 points, about 4% of its value, this week. Mexican stock market takes the down elevator.
U.S. markets rallied briefly this morning, but began to fall again by mid-day.
Mexico's economy grew 4% in 2012, and 3.24% in the first month of 2013. In January president Enrique Peña Nieto and Banixco director Agustín Carstens said in separate statements that the country was well positioned for a repeat performance of 4% growth this year, and possibly higher.
"This scenario, without a doubt, offers Mexico an enormous potential for growth, and we want to take full advantage of it," said the new PRI chief executive. "We want to grow the economy in an equitable manner, which allows for significant development throughout the country. To that end, our focus will be on spreading prosperity while extending economic opportunities even to the remotest corners of the country. Our government wants to be a great facilitator of investment in Mexico."
In a clear reference to the country's yet raging drug war, the prresident added, "We want to create greater legal confidence in investing in Mexico." Peña Nieto: Mexico poised for 4% economic growth.
Now Banixco is prognosticating 3% growth in 2013, although some analysts say it will be lucky even to reach that. Both assessments are far less rosy than Carstens offered in January, when he insisted that Mexican economic growth would easily outstrip its neighbor's to the north. Banxico chief: grim prognosis for U.S. economic growth.
At the same time Carstens reassured investors that the peso is stable, and said the government has no plans to tamper with it. Mexican peso "well anchored," says central bank director. While no one has suggested the peso is an unstable currency, in recent weeks it has disappointed expectations. As May ends, U.S. dollar stages powerful rebound.
Stats relied upon by Banixco yesterday told the whole story. In the first quarter of 2013, Mexico's producto interno bruto (PIB), or gross domestic product, grew a scant 0.8% on an annualized basis. In the first quarter of 2012, annualized PIB expansion was more than six times that - 4.9%.
A Banixco committee noted Thursday that its projections are based on the likelihood of "economic recovery consolidation in the U.S." What that clumsy term means is a slowing or stalling economic engine north of the border, at least in the opinion of the central bank's experts. But they've already been wrong twice this year on Mexico's domestic economy, which continues to flounder.
July 27 - In a bleak announcement issued late yesterday, Banixco reported that Mexico's economy experienced a "significant deceleration" in the second quarter, which will have "inflationary and monetary consequences" during the remaining five months of the year. The central bank attributed the situation to reduced demand for manufactured products, especially those destined for U.S. markets.
Aug. 1 - Mexico's Secretaría de Hacienda y Crédito Público, the federal government's tax collection and budget planning agency, estimates the national economy will grow 3.1% this year . . .
Aug. 7 - but today Banixco slashed that optimistic forecast, and said growth will be a mere 2-3%.
Aug. 21 - Sluggish Mexican economy worries foreign investment experts
Aug. 31 - Bank of America Merrill Lynch: Mexico in huge economic hole; looming "risk of recession"
Sept. 3 - Concurring with recent forecasts of Mexico's internal revenue secretary as well as private investment houses, Banixco today predicted the economy will grow but a scant 1.78% in 2013.
Sept. 18 - Mexico is in full recession, with major pension and social service funds "broke"
Sept. 27 - Credit Suisse: storms will further reduce Mexican growth
Oct. 2 - Banixco: 2013 projected growth lowered from 1.78% to 1.43%.
Oct. 8 - Wal-Mart sales in free fall a good barometer of a Mexican economy on the skids
July 2 - Peso, dollar remain volatile; Banixco has $166 billion USD banked abroad
June 12 - As peso continues its slide, Peña Nieto puts a trillion of them on the table
June 12 - 59% of Mexicans remain trapped in underclass
Banixco chair Agustín Carstens has plenty of reason to look glum these days
© MGRR 2013. All rights reserved. This article may be cited or briefly quoted with proper attribution or a hyperlink, but not reproduced without permission.
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