The economy of Mexico – it’s time to pay attention to the Mexican peso!

In this article we will talk about country that does not take the main attention of many traders. Mexico is an industrial-agrarian country, and Mexico’s economy is one of the most developed in America. Such things as oil, gas, iron ore, mercury, graphite and antimony ore are mined in Mexico. Despite the production of oil, Mexico has to export petroleum products because of the poorly developed oil refining industry. Now let’s go directly to the economic indicators of the country.

Economy of Mexico: GDP

Let’s start with the main indicator of the economy – GDP (Gross domestic product). According to the latest data, on an annualized basis, Mexico’s GDP growth slowed to 1.5%, against 3.3% a year earlier. Partial loss of GDP growth is caused by a decline in oil production, which in December 2017 dropped to 1.9 million b/s and 2.6 million b/s in 2016 and continues to decline.

Fig.1 Dynamics of changes in GDP growth in annual terms from 2015 to 2018

Economy of Mexico: Unemployment rate

The unemployment rate is a key indicator of the state of the country’s social sector. A low unemployment rate has a positive effect on the incomes and expenditures of the population, stimulating inflation. According to the latest data, the unemployment rate in Mexico fell to 2.9%, against 3.5% a year earlier. It is worth noting that the current unemployment rate in Mexico achieved due to a significant number of labor migrants in the United States.

Fig. 2. Dynamics of changes in the unemployment rate from April 2017 to March 2018

Economy of Mexico: The rate of inflation

Unlike those countries, which I have written about earlier, Mexico’s inflation rate exceeds the target range of 2% -3%. According to the latest data, the annual inflation rate is 5.04%. To reduce inflationary pressures, the Bank of Mexico conducts a tight monetary policy. Since December 2015, the interest rate has increased 12 times and increased from 3.0% to 7.50%.

Fig.3 Dynamics of changes in the level of inflation from April 2017 to March 2018

Conclusion

It is worth noting that the economic indicators of the Mexican economy show good results. In turn, Mexico is in a rather difficult situation. The thing is that the main trading partner, accounting for about 71% of exports, is the United States, which allows the States to exert pressure on the economy of Mexico. Mexico is part of the North American Free Trade Area (NAFTA), which also includes the United States and Canada.

At the end of 2017, the US president raised the issue of revising the details of the trade agreement, since in his opinion they are not beneficial to the US. Trump’s statement caused concern among US trading partners, and therefore, when trading on Mexican pesos, we need to closely monitor the news about trade relations between the US and Mexico. Also, read my article “Peculiarities of trade on the Mexican peso“.

Alexander Sivtsov

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