Mexico

Current Economic Outlook

RGE continues to believe that Mexico’s economy will fall less severely in H2 2009 (‐5.1% y/y), compared to H1 2009 (‐9.3% y/y), on the recovery of domestic sentiment and somewhat better external conditions. This means that on a seasonally adjusted basis, Mexico likely touched bottom in Q3 2009. Though RGE anticipates GDP to post positive growth starting in Q1 2010, on a year‐over‐year basis, this will mainly be on the back of a low base rather than improvements in real growth dynamics. This assessment relies upon RGE’s view that the U.S. economy will contract 2.7% in 2009 and expand 1.8% in 2010. Overall, RGE maintains the view that Mexico’s GDP will contract 7.2% y/y in 2009 (for a range of ‐6.75% y/y to ‐7.25% y/y) and that the rebound will be modest at around 2.75% (2.5% y/y to 3.5% y/y range) in 2010, which is below potential (3.3% y/y). The main risks to Mexico’s outlook are a “W”‐shaped business cycle in the U.S., (which is not RGE’s base case scenario), lack of Mexican reforms, and continuous decline in oil output.

Read the latest RGE Global Economic Update.