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Consensus
more optimistic about economic prospects
The improved
international setting and the recent uptick in economic activity could
translate into a revival of the domestic economy. In May,
consumer confidence increased by 3.4 percentage points over last month.
Moreover, for the first time in a year, all five subcategories that poll
opinions about personal and national economic assessments surveyed by
INEGI, increased over the previous month. Consensus Forecast
panellists have reflected the recent positive developments by raising
their forecasts for economic growth this year by 0.3 percentage points
over last month to 3.5%. Growth prospects for next year remained
unchanged at 3.4%.
Current
account deficit shrinks in first quarter amid increased transfers from
Mexicans abroad
In the first
quarter, the current account balance recorded a deficit of US$ 1.9 billion,
equivalent to 1.1% of GDP. The deficit was below the US$ 3.4 billion
registered in the preceding quarter and below the US$ 2.1 billion deficit
(1.4% of GDP) observed in the first quarter last year. The decline
over last year was the result of a higher surplus in the transfers balance.
The transfers surplus increased from US$ 2.9 billion in the first quarter
2003 to US$ 3.5 billion in the first quarter 2004. The increase
mainly reflects higher transfers from Mexicans living abroad, which grew
by 21.8%. In the recent past, these transfers have become an
increasingly important source of funding for Mexico and in the first
quarter, the amount was equivalent to almost three quarters of oil exports.
The deficits in the trade and the service balances, in contrast, increased.
The first quarter trade deficit of US$ 423 million exceeded last year’s
virtual balanced account despite a 10.7% increase in exports. Rather
than being the result of higher oil prices, the increase in exports is the
result of higher external demand, particularly from the United States.
As a result, non-oil exports rose by 11.7% over the first quarter 2003,
the highest increase in the last three years. Oil exports, in
contrast, increased by only 3.4%, as the benefits of high oil prices have
been concentrated mostly in the second quarter. In the first quarter,
West Texas Intermediate (WTI) oil prices were only 3.5% above the same
period last year. Imports increased 11.6% over the first quarter
last year. The increase was concentrated in intermediate goods,
which mainly serve as input for the export-oriented manufacturing industry
(+13.6% year-on-year). Imports of consumer and capital goods, on the
other hand, expanded by only 4.6% and 5.9% respectively.
Capital
account surplus drops despite inflows from bank sale
The capital
account registered a surplus of US$ 4.1 billion in the first quarter.
This was sufficient to cover the current account gap but was well below
the US$ 6.2 billion surplus recorded in the first quarter last year.
The surplus dropped in spite of a massive inflow of foreign direct
investment related to the purchase of outstanding shares in BBVA-Bancomer
by Spanish bank BBVA. In fact, the transaction resulted in an inflow
of US$ 4.2 billion and thus accounted for the entire capital account
surplus. However, the transaction also triggered a US$ 2.5 billion
outflow in portfolio investment as foreigners sold their shares in
BBVA-Bancomer. The main constituent of the declining capital
account surplus were increasing assets of Mexicans abroad. According
to the Central Bank, the increase mainly reflects higher assets from both
the private and public non-banking sector. |
