Mexico likely recorded weaker trade balance in February

28 March 2016, 11:11
Batur Asmazoglu
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In 2015, Mexico posted a trade deficit of USD14.5bn with imports dropping 1.2% and exports 4.1%. The country had posted a deficit of USD 2.8 billion in 2014. Most of the decline in the trade balance is due to lower oil exports in terms of value. Pace of nominal exports’ contraction has increased in recent times. Meanwhile, the slowdown in US demand growth suggests a weak external demand situation, which is evident in the slowdown of manufacturing growth and weak growth in real exports in Q4.

After the impact of low oil prices fades away, Mexico’s export growth is expected to recover, presuming a sustained moderate growth of the US economy. However, this scenario will take place after a long time.

“We expect falling export and import growth in February to lead to a weaker trade balance of USD48m (as against USD592m in February 2015)”, says Societe Generale.

The current account deficit is being kept in check with the help of manufacturing export growth. But trade numbers are being pressured on the downside due to lower oil exports. The country’s public finances and external account both are being impacted by declining oil prices. Therefore, on a structural basis, the current account balance has declined by 0.5% and 0.8% of GDP. Moreover, it will require significant rebound in manufacturing exports for the current account to come to its former size. This needs the US economy to grow at or above the 2% rate.
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