High uncertainty about US policy with Mexico - BNPP

Analysts at BNP Paribas expects real GDP growth in Mexico to slow from about 2% this year to close to 0% in 2017, as BNPP suspects balance-of-payment conditions will deteriorate more than most observers seem willing to admit.

Key Quotes

“However, uncertainty on US policy prospects remains very high. The main upside risk to our high-confidence, out-of-consensus view, is that increased fiscal spending in the US could spur economic growth in that country and help Mexican exports, outweighing threats to bilateral trade flows. But beyond external factors, Mexico faces its own domestic challenges, including political uncertainty ahead of the 2018 elections.”

“Mexico’s fiscal numbers have repeatedly underperformed official promises over the last several years and looks set to disappoint again. Rating agencies are likely to take notice, adding downside risks to our cautious view on prospects for Mexico’s growth.”