Friday, May 23, 2014
Mexico slashes 2014 growth projection, on sluggish first quarter economic performance
Mexico's Finance Ministry today cut its projection for 2014 growth from 3.9% to 2.7%, as the release of first quarter economic data had officials scrambling to paint a bright picture in the face of yet again disappointing results.
The revised forecast - a 31% reduction from the Ministry's previous estimate in December 2013 - had been widely expected for weeks. Today's publication of first quarter economic results by the National Institute of Statistics (INEGI), an autonomous agency charged with compiling such data, required the Ministry to delay no longer.
INEGI reported that in the first three months of the year the economy grew a scant 0.28% compared with the previous quarter, less than half the 0.6% which had been projected by Banixco, the nation's central bank. When measured against the first quarter of 2013, the economy grew 1.8%.
A senior official of Mexico's Secretaría de Hacienda y Crédito Público (SHCP) acknowledged during a morning press conference that the results were "insufficient," but added, "In the Ministry we remain committed to the implementation of the administration's structural reforms, and we are working hard to ensure greater growth in the years ahead."
Citing a report by the 34 member nation Organization for Economic Cooperation and Development, SHCP undersecretary Fernando Aportela said Mexico has growth potential on a level with Germany, Japan and the United Kingdom, and remains attractive to foreign investors.
Aportela attributed the poor numbers released today to a "less dynamic" U.S. economy, with negative consequences for Mexico's productive sector.
Despite a whirlwind of energy, tax and business reforms which have become the trademark of the 18 month old administration of president Enrique Peña Nieto, good economic news has eluded him.
In 2012, the last year former president Felipe Calderón Hinojosa was in office, Mexico's economy turned out a record, robust performance of 4% growth. In 2013, Peña Nieto's first year in office, the economy grew but 1.1%, it's weakest display since 2009. Mexico gets a very poor 2013 economic report card.
In January the economy grew only 0.8%, computed on an annualized basis. Mexican economy off to a shaky start in 2014.
Two days ago Banixco director Agustín Carstens reduced the central banks's previous 2014 forecast of 3-4% growth, to a revised estimate of 2.3-3.3% growth.
On May 19 Mexico's Center for Private Sector Economic Studies claimed the country has clearly passed into full recession. In the organization's weekly newsletter, CEESP analysts attributed the problem to a slower paced American economy, coupled with the two hurricanes which hit Mexico last September. Credit Suisse: storms will further reduce Mexican growth. It also blamed Peña Nieto's tax reforms:
"We're were promised that the fiscal reforms would jump start the economy, when in reality just the opposite has occurred. They have chilled investor incentive and burdened domestic economic activity."
Mexican Finance Minister Luis Videgaray acknowledged recently that new taxes imposed by the PRI administration on snacks, soft drinks and miscellaneous other items have stifled consumer demand. Comida chatarra, or junk food, is hugely popular in Mexico, which has one of the world's highest obesity rates. The taxes were justified as a public health measure, but like all such levies they affect those at the bottom of the earnings' ladder the most. Reduced consumption has been the result. U.K. report: life is getting harder, not easier for Mexicans.
May 8 - Mexico says insecurity costs it $16.6 billion USD annually, and 50 lives a day
Feb. 28 - Merrill Lynch: weak U.S. demand, domestic insecurity challenge Mexican economy in 2014
Feb. 18 - Mexican economy continues to shed jobs
Oct. 8 - Wal-Mart sales in free fall a good barometer of a Mexican economy on the skids
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
June 21 - Banixco raises storm flag warning on Mexican economy
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at 4:28 PM