This publication was archived on 4 July 2016 This article is no longer current. Please refer to Overseas Business Risk – Mexico
Economic Overview: December 2014
Economic activity in 4Q2014 closes with stronger signs of recovery. The construction sector has started to grow, with significant positive impacts on employment. 2014 growth forecast from Finance Ministry between 2.2% and 2.5%, but independent analysts and the Bank of Mexico expect a slightly lower figure around 2%. Expected growth rate for 2015 remains high at 3.5%, even allowing for energy sector suffering from falling oil prices. The Government faces a complex scenario for 2015, after ending 2014 with three outstanding economic concerns: the ongoing fall in oil prices and its effects on economic performance, pressure on the Central Bank to adjust its monetary policy in the near future, and a weak recovery during 3Q2014. However, if it manages these well, Mexico should perform better than the majority of emerging markets in Latin America.
The price of the Mexican oil barrel has been decreasing daily since October 2014. Government revenues have been affected by this fall. Not all the effects of this depreciation will be negative: the depreciation of the exchange rate, paired with good economic performance of the American economy in Q4 2014, could boost exports in the short term. However there are potential significant long term effects for the Mexican energy reform.
On January 4, President Peña Nieto released a Forward Look for 2015 via his website. He used the message to announce seven policy actions to improve the welfare of Mexican households. The purpose of these measures is to deliver concrete results in order to compensate for the underperformance of the economy. Overall, these actions could bring some gains in certain specific sectors such as manufacturing and telecoms, but they won’t compensate for the lack of sustained growth in overall income per capita.