Growth Expectations for Mexico Decline

Private economists surveyed in April by the Bank of Mexico lowered their estimates for economic growth this year, ratcheting down expectations in the wake of a weak first-quarter for the U.S. economy.

GDP is expected to expand 2.8% this year, according to the median estimate of 36 analysts polled by the central bank, down from 3% in March, survey results showed Tuesday. The economy grew 2.1% in 2014.

The latest estimate for 2015 follows a disappointing 0.2% expansion in U.S. GDP in the first quarter. That is likely to have a negative effect on Mexico, which sends close to 80% of its exports to the U.S. and relies on manufactured exports for a significant part of its economic growth.

Estimates for first-quarter growth in Mexico slipped to 2.6% from 2.7%, according to the survey.

Public security problems remained the most perceived risk to growth, followed by declining oil production in Mexico, international financial instability and weakness in external and domestic markets.

Despite the lower growth forecasts, expectations for private-sector job creation grew from the month before, and the unemployment rate is expected to slip to 4.45% from 4.5%.

The Bank of Mexico uses the monthly surveys to gauge market expectations as it sets monetary policy. The bank left its overnight interest rate target at 3% last week for a seventh consecutive meeting, noting continued risks to growth and inflation expected to hold near the bank’s 3% target.

Economists lowered slightly their expectations for inflation this year, and see the consumer price index up 3.04% at the end of December, compared with 3.09% in the March survey. The Bank of Mexico projects inflation to be under 3% by the end of the year.

Economists see the Mexican peso appreciating against the U.S. dollar by year-end, although by less than they had estimated in March. The median estimate for the exchange rate at the end of 2015 was 14.95 pesos to the dollar, compared with 14.79 a month earlier. The peso was quoted in Mexico City at 15.2760 to the dollar early Tuesday, according to Infosel.

Write to Anthony Harrup at [email protected]

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