Banxico predicts higher volatility due to external risks

Banxico predicts higher volatility due to external risks

Mexico City.- During the first quarter of 2018, the Mexican economy maintained the capture of resources through the financial account, despite the uncertainty due to risks in the global environment, for which an increase in volatility is expected, warned the Bank of Mexico ( Banxico). When announcing the Balance of Payments in the First Quarter of 2018, the central institute highlighted that the expectation of a solid growth of global economic activity for the rest of 2018 and 2019 is maintained, “although the risks for the global economy in a medium and long term perspective “. These risks include an environment of greater volatility in international financial markets given the possibility of surprises in the levels of inflation in some advanced economies, especially in the United States, as well as an escalation of protectionist measures and the materialization of some geopolitical events. “These risks have recently begun to be reflected in greater volatility in financial markets and, in particular, in a moderation in capital flows to emerging economies, in a context of increasingly stringent financial conditions,” he said. However, he pointed out that “during the reference period, the Mexican economy continued to capture resources through the financial account, mainly through direct investment and portfolio. However, forward volatility episodes derived from the mentioned risks can not be ruled out “. In the first quarter of the year, the financial account showed a net indebtedness that involved an inflow of resources for seven thousand 955 million dollars, including an increase in reserve assets of two thousand 128 million dollars, he explained. The central institute specified that the current account registered a deficit of six thousand 941 million dollars and in turn the capital account resulted in a deficit of 24 million dollars. For its part, the line of errors and omissions exhibited a negative flow of 990 million dollars. In its report, Banxico highlighted that the strengthening of economic activity at the global level contributed to maintain a strong dynamism in Mexico’s manufacturing exports, in the first quarter of 2018 and the current account deficit stood at 2.3 percent of the Gross Domestic Product (GDP), lower than the figure observed in the same period of 2017 of 4.0 percent of GDP. This deficit was the lowest recorded for a first quarter in the last six years, both in dollars, as a proportion of GDP, he explained. In particular, the annual decrease in the deficit reflected the increase in the surplus of the non-oil trade balance, together with the annual reduction of the primary income deficit and the greater surplus of the remittances account; in contrast, the deficit in the oil trade balance continued to widen, he said.

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