Friday, February 28, 2014

Merrill Lynch: weak U.S. demand, domestic insecurity will continue to challenge Mexican economy in 2014

*Updated Aug. 13*
Guadalajara -
Bank of America Merrill Lynch (BOA-ML), which last August warned investors of a "looming risk of recession" in Mexico, said today that 2014 should be better, but stopped short of endorsing the government's growth prognosis.

"The economy will remain weak and growth will proceed slowly as the year unfolds," it reported, warning of soft domestic consumer demand. Wal-Mart sales in free fall a good barometer of a Mexican economy on the skids.

BOA-ML had earlier forecast 4.1% GDP growth in 2014, but today reduced that number to 3.75%, below the PRI administration's official projection of 3.9%. It said the economy will not pick up steam until the second half of the year, and acknowledged that the general international consensus is that 2014 growth will be even less, around 3.4%.

"Reduced public spending by the federal government, economic reforms which will not immediately yield results, modest GDP growth and domestic security challenges" present major challenges to Mexico's economy in the year ahead, wrote a BOA-ML economist.

BOA-ML noted that continued "weak demand from the United States, the principal market for Mexican manufacturers," remains a significant contributor to slow expansion here. But it expressed optimism overall, saying "the worst would appear to have passed" and the economy should considerably improve over last year, the current administration's first full one in office. President Enrique Peña Nieto has put growth, job creation and the elimination of the direst poverty front and center, as he advances an unprecedented reform agenda at a relentless pace, albeit with mixed results. Mexican economy continues to shed jobs.

One week ago the government officially reported that Mexico's GDP growth last year was a paltry 1.1%, far below the originally projected 4%. It was the country's worst performance in years. Mexico gets its very poor 2013 economic report card.

In related news Mexico's stock market, the Bolsa de Valores, closed out February with a 5.13% monthly decline, its worst loss since September 2011.

Mexico's worsening economic forecast for 2014, according to the experts
Mar. 1 - HSBC has jumped on the BOA-ML bandwagon, offering the same prediction of 3.7% growth.
Mar. 6 - But Banamex says it will only reach 3.3%, dropping by a half point its earlier estimation of 3.8%.
Mar. 18 - The Mexican Institute of Financial Executives (IMEF) predicts 2014 growth will be 3.1%.
Mar. 28 - BOA-Merrill Lynch has downward revised its estimate to 3.5%, noting that Mexico remains heavily affected by the U.S. economy.
Apr. 5 - Banixco chair Agustín Carstens said yesterday that the central bank will update its 2014 GDP prognosis in May. That can only mean the official number of 3.9% - far above what the private sector is predicting - is headed south. 2013 is repeating itself.
Apr. 8 - The International Monetary Fund's prognosis is 3% growth in 2014, and 3.5% in 2015.
Apr. 9 - The World Bank, a United Nations financial institution which provides loans to developing countries for capital investment, today dropped its estimate of 2014 growth from 3.4% to 3%.
May 6 - The 34 member nation Organization for Economic Cooperation and Development (OECD) has gone against the grain, predicting Mexico's economy will grow by 3.4% in 2014 and 4.1% in 2015, down from the 3.8% and 4.2% it forecast last November. OECD attributes the rosy prognosis to what it says will be a strong increase in demand from U.S. markets, coupled with Mexican energy and tax reforms which will begin to deliver results later this year.
May 7 - Private economists surveyed by the central bank, Banixco, have downward revised their 2014 growth estimate for the fourth time this year, to an average of 3.01%. When asked why, the plurality response (20%) was that security concerns continue to interfere with orderly GDP expansion.
May 23 - Banixco director Agustín Carstens has reduced the central banks's previous 2014 forecast of 3-4% growth, to a revised estimate of 2.3-3.3% growth.
June 3 - Those same economists have further lowered their estimate to 2.77%, their fifth reduction in 2014. Domestic insecurity was again the primary reason offered (20%).
June 10 - The World Bank today cut its projection for Mexican economic growth from 3% to 2.3%, its second reduction this year.
July 24 - The International Monetary Fund today cut its estimate from 3% growth, previously reported in April, to 2.4% - a 20% reduction.
Aug. 13 - Banixco director Agustín Carstens today reduced the central banks's 2014 forecast of 2.3-3.3% growth to a revised estimate of 2.0-2.8%. Mexican economy still stuck on a southbound train.

May 7 - Mexican economy remains stagnant in 2014, but the government paints a bright picture

Aug. 13 - Mexican economy remains stuck on a southbound train
May 23 - Mexico slashes 2014 growth projection, on sluggish first quarter economic performance
May 8 - Mexico says insecurity costs it $16.6 billion USD annually, and 50 lives a day
Mar. 25 - Mexican economy off to a shaky start in 2014, January data shows
Feb. 19 - Leftist PRD senators ask Peña Nieto to renegotiate NAFTA

Dec. 20 - Mexican minimum wage in 2014 will be $5 dollars - a day
Nov. 26 - Mexico's economic woes take a toll on Yucatán business
Sept. 27 - Credit Suisse: storms will further reduce Mexican growth
Sept. 18 - Mexico is in full recession, say business executives
Aug. 31 - Bank of America Merrill Lynch: Mexico in huge economic hole; looming "risk of recession"
Aug. 21 - Sluggish Mexican economy worries foreign investment experts

Dec. 28 - Mexico pays enormous price for domestic insecurity

© MGR 2014. 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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