Mexican current account deficit narrows further in fourth quarter 2016
By Alexander Bueso
Date: Friday 24 Feb 2017
(ShareCast News) - Mexico's current account deficit narrowed over the last three months of 2016 on strength in manufacturing, but risks were on the rise, economists said.
In the fourth quarter, the current account deficit worsened from $7.6bn in the third quarter to $3.3bn (consensus: $5.3bn).
During the same quarter one year ago, the deficit had come in at $7.3bn.
For 2016 as a whole, the deficit narrowed to the equivalent of 2.7% of gross domestic product, from 2.9% in the prior year.
"The deficit is relatively low and easily financed, for now," Andres Abadia, Senior International Economist at Pantheon Macroeconomics said.
But risks were rising.
Paradoxically, remittances from Mexican workers in the States might increase in coming quarters in anticipation of US president Donald Trump's wall.
Manufacturing demand from the US should also improve and the drag from lower oil output ease.
Hence, Abadia expected the total current account deficit to ease slightly further in 2017.
Be that as it may, risks for foreign direct investment flows - which were financing the bulk of the deficit - had risen under the Trump administration.
Net portfolio flows on the other hand should continue to improve - like they did in 2016 - as the Mexican central bank continued to raise rates, Abadia explained.
As of 1653 GMT the US dollar was bouncing back by 1.06% to 19.88 following recent steep losses.
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