Economics: GDP growth consensus forecast upwardly revised but investment outlook remains weak
Economic growth estimates have been upwardly revised by authorities and analysts. The central bank boosted its growth projection to an annual 6%, up from the previous 4.25% projection. We at GEA, however, maintain our 4.5% growth projection for 2021. Growth in January-April was 2.6%.
According to Banxico, there are still challenges hindering the economic recovery, and an environment of high uncertainty persists, given that the COVID-19 pandemic is still ongoing, albeit with fewer new cases. However, the upward revision of global growth forecasts, mainly in the United States, the progress of vaccination campaigns in several countries, including Mexico, and the reduced restrictions on mobility are giving rise to a more favorable outlook for the next few quarters in the private consumption variable.
Yet aggregate supply and demand for the first quarter of 2021 reflected a continued weakness in investment. Public investment fell an annual 6.1% while private investment posted its ninth consecutive decline, decreasing 4.8%. Investment levels achieved during 2021 remain well below the 2015-2018 average. This is cause for concern, given that as long as there is no sustained expansion of investment, especially private investment, the possibilities of returning to the road of economic growth will be very limited in the medium term.
Meanwhile, the country’s trade balance from January-May was US$ 333 million in the black. The deficit in the oil balance was offset by the positive numbers posted by the non-oil balance. This, together with a record level in remittances, is resulting in a currency surplus in the forex market and is helping maintain the strength of the peso against the US dollar.
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