Now offering wire transfer and ACH payment methods!

Currency News

Mexico posts worst growth in 2 years

Mexico got spooked this summer.

The economy posted its worst quarterly growth in two years. Mexico only grew 2% between July and September, compared to the same time a year ago, the government announced Monday.

"There's a lot of headwinds in the economy," said Win Thin, head of emerging market currency strategy at Brown Brothers Harriman.

Mexico is losing its step this year for a variety of reasons. The government has cut spending, manufacturing production has been weak and consumer confidence has declined, all holding down overall growth.

Low oil prices, and weak demand from Americans also held back Mexico during the quarter, economists say. Trade with other nations -- largely with America -- makes up over a third of Mexico's economy.

It doesn't help that U.S. Republican presidential candidate Donald Trump constantly threatens Mexico with tariffs or a wall along the border.

Even though experts say Trump was not a factor for the economic slowdown, the Mexican peso's fortunes seem to be tied to Trump. It has fallen whenever Trump's election odds rise. The peso's value is down 8% this year against the dollar.

A weaker peso could actually help improve exports because it makes Mexican goods more affordable abroad. But Mexico hasn't yet benefited from that advantage. The value of its exports has declined six out of the first nine months this year.

Political uncertainty is also playing a role in the economic mood of the country.

Mexico's president, Enrique Pena Nieto currently has the lowest approval ratings since pollsters started tracking them in the mid-1990s. With two years left before he leaves office, experts say he's become a lame duck president unable to do any more meaningful reforms.

Whether or not Trump wins -- the other major political risk to the economy -- Mexico faces a tough road ahead.

"Even without Trump, the strength of the [economy] is unlikely to be sustained," says Neil Shearing, emerging markets economist at Capital Economics, a research firm.

original source:

Back to Top