The Mexican Peso has weakened overall in April despite Wednesday’s Heath-inspired recovery. This is mostly due to the Banxico cutting interest rates in March whilst the majority of major central banks continue to delay because of stubbornly high inflation.
The Peso may also have been hit by recent downgrades to growth forecasts for the Mexican economy from both the Banxico and the IMF.
“The forecast for Mexico is revised downward on account of weaker-than-expected outcomes for end-2023 and early 2024, with a contraction in manufacturing,” said the IMF in its latest World Economic Outlook report.
The fall off in economic growth is being put down to lower government spending in 2025, in order to bring down the country’s budget deficit.
However, it’s difficult to see how a programme of radical budget cuts would work politically.
Mexico will hold a presidential election on June 2, when it will also vote in the 628 deputies of the national assembly. It’s likely to be a two-horse race between the leading center-left candidates’ Claudia Scheinbaum and Xochitl Gálvez, according to Columbia Threadneedle Investments.
“We believe that regardless of who wins the election, Mexico is bound for a similar fate as other countries in the region, where governability has weakened and policy proposals have stagnated,” says Columbia Threadneedle on the outcome.
Given both candidates are of the left and likely to lead a weak government, expectations for budget tightening seem a little exaggerated, given the lack of maneuver foreseen to make unpopular decisions.
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