Mexico’s 2.0 Percent Growth Goal Sounds Optimistic

The optimism of the Ministry of Finance and Public Credit’s (SHCP) 2 percent GDP growth forecast is not shared by banks and financial groups. In contrast to the SHCP, the highest expectation from the banks comes from BBVA which predicts 1.3 percent growth. Bank of America offered a forecast of just 0.5 percent growth.

Deputy Minister at the SHCP Gabriel Yorio stated that the expected private investment into roads, airports and ports will add 0.5 percent to Mexico’s GDP. “If this [investment] is implemented throughout the year, we would arrive at 1.3 percent growth plus 0.5. This would carry us close to the 2 percent growth goal,” he explained.

The challenge ahead, said the deputy minister, will be to set up the MX$859 billion (approx. US$16.1 billion) National Infrastructure Investment Agreement, which will be funded by both the federal government and private industry, and which was announced in November. The health of the 147 projects included in the agreement are going to be key for President López Obrador, who is still struggling to mend his relationship with the private sector.

Today, more banking and finance organizations are trimming their forecast for Mexico in 2020 pending the outcome of these investment projects.

Banxico lowered its forecast from 1.1 to 1 percent growth after surveying 39 financial institutions. The International Monetary Fund’s (IMF) World Economic Outlook (WEO) update expects Mexico’s GDP to grow 1 percent this year, a reduction of 0.3 percent compared to its October forecast.

Bank of America (BofA) just announced a 0.5 growth forecast, a reduction from its  previous 0.9 percent expectation. BofA said that disappointment after last year’s bad results, along with poor investments and low export expectations, are dragging growth rates down. The bank is expected to lower its forecast further in future reports.

So far, this are the GDP growth expectations for 2020 in Mexico:

2.0          SHCP

1.3          BBVA

1.2          The World Bank

1.0          Encuesta Citibanamex, Encuesta Banxico, IMF and Moody’s

0.8          Banorte

0.6          Barclays

0.5          Bank of America