Last year, Mexico’s imports and exports declined 1.2% and 4.1% respectively. This resulted in a wider trade deficit of USD 14.5 billion as compared with 2014’s trade deficit of USD 2.8 billion. Lower oil exports, in terms of value, was responsible for nearly all the decline in trade balance. The contraction pace of nominal exports and imports was up in the first quarter of 2016. Meanwhile, the decelerating pace of real exports growth in the fourth quarter implies a weak foreign demand scenario, probably because of subdued demand growth in the US.
If the US continues to grow at moderate level, Mexico’s export growth is likely to accelerate again after the impact of low oil prices fade, said Societe Generale in a research report. However, the likelihood of the rise has fallen in recent months.
“We expect falling export and import growth in April to lead to a weaker trade balance of –USD543m (as against –USD85m in April 2015)”, added Societe Generale.
Even if the growth in manufacturing export keeps a lid on the current account deficit, lower oil exports have put pressure on the downside on trade numbers. Declining oil prices have impacted Mexico’s public finances and external account. Hence the current account balance has declined between 0.5% and 0.8% of the GDP on structural basis.
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