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The Mexican economy will accelerate in the coming quarters

The Mexican economy will accelerate in the coming quarters

Posted by Ricardo Vázquez on September 05, 2014

Weaker-than-expected economic activity in H114 has prompted us to downgrade our 2014 real GDP growth forecast for Mexico from 3.1% to 2.6%. However, we expect the economy to acce lerate markedly in H214 and 2015 , driven by a recovery in the construction sector , stronger manufacturing exports and an improvement in real private consumption.

The Mexican economy will accelerate in the coming quarters, driven by a return to growth in the construction sector, a stronger export performance in the manufacturing sector, and an improvement in consumer-related services. While weaker-than-expected real GDP growth of 1.7% year-on-year (y-o-y) in H114 has prompted us to downgrade our 2014 full-year forecast from 3.1% to 2.6%, we still expect the economy to pick up from 1.1% in 2013. Moreover, we expect economic activity to continue to strengthen in 2015, when we forecast real GDP growth of 3.7%.

The construction sector, which has been among the worst-performing sectors in recent quarters, expanded for the first time in 18 months in June (see chart below), and we expect the sector's recovery to be sustained in the coming months ( see 'Economic Recovery To Be Sustained As Construction Sector Returns To Growth' August 13). Our view for a sustained recovery in the construction sector is underpinned by an improvement in the residential sector, as well as signs of stronger public investment into infrastructure projects. Following significant bureaucratic-related delays in public investment last year, President Enrique Pena Nieto's USD594.0bn five-year National Infrastructure Plan, which represents a significant increase from the USD394.0bn originally allocated to the programme when it was first announced in July 2013, will be a main driver of stronger construction activity in the coming quarters.

 

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