Following a challenging but successful 2017, 2018 has the potential to be another prosperous year for Mexico. 2017 came to a close with vast uncertainty, namely NAFTA (North American Free Trade Agreement) that has been an ongoing point of discussion. This could be the cause of a turbulent start to 2018, but over the course of the year continued steady growth is anticipated.
The OECD reports that despite uncertainty, growth should continue above 2%. A tightening monetary policy could bring about a fall in private consumption because of the current high inflation, but at the same time, the contributions of exports and investment towards growth look set to increase, so as to offset any fall in economic growth which could result from private consumption. Thankfully, the September earthquakes had no impact on Mexico’s productive capacity, but the construction sector will reignite in order to repair the damages caused which will provide further support to economic growth. Following a fall in business confidence in 2016, it has since been on the rise and looks set to continue to rise according to the OECD.
A much-needed fall in inflation is also expected. The end of 2017 came with an inflation rate of 6.7%, not only the highest rate of the year but also the highest experienced in Mexico since 2001. Despite this, many believe that we have passed the worst of this inflation, and as of the first quarter of 2018, the rate will decrease. There are hopes that come the end of 2018, the inflation rate will be far closer to a respectable 3%. (more…)