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Mexico braces for weak growth, high inflation as Trump takes office: Reuters Poll
January 18, 2017 / 2:32 PM / in a year

Mexico braces for weak growth, high inflation as Trump takes office: Reuters Poll

BRASILIA (Reuters) - Mexico’s economy is set to grow at the slowest pace in four years in 2017, a Reuters poll showed on Wednesday, after the election of Donald Trump to the White House upended relations with its biggest trade partner and foreign investor.

A general view of a market in Mexico City, Mexico, January 11, 2017. REUTERS/Tomas Bravo

The full impact of a Trump presidency remains unclear to economists, as many said they were waiting for Trump’s first 100 days in office to see if he makes good on promises to build a border wall and raise trade tariffs.

Forecasts for economic growth elsewhere in Latin America were also revised down for most countries, the poll showed, projecting a slower recovery for a region that has struggled in recent years to keep a fast pace of growth amid low commodity prices and heightened market volatility.

Mexico’s economy is expected to grow 1.7 percent in 2017, according to the median of 23 forecasts, down from 2.3 percent in an October poll and after an estimated expansion of 2.0 percent in 2016.

The downgraded forecast is a blow to unpopular President Enrique Peña Nieto ahead of elections this year and next.

Mexico sends 80 percent of its exports to the United States.

“The consequences to the risks we face this year, mostly related to politics, are not entirely understood,” said Jesus Lopez, an economist with Banco Base, who expects a drop of 15 percent in foreign direct investment from 2016.

Consumer prices are set to rise 4.0 percent this year, according to the poll, boosted by a record slump in the peso MXN= since Trump was elected in November. Riots broke out after a 14 percent increase in regular gas prices on Jan. 1, also reflecting anger at Pena Nieto over corruption, crime and the failure of reforms to improve living standards.

Interest rates are expected to climb to 6.75 percent in Mexico, from 5.75 percent currently.

Peru will probably continue to be the fastest growing economy in Latin America, with an expansion rate of 4.1 percent in 2017, according to the poll. Argentina is likely to resume growth as neighboring Brazil exits a two-year-long recession.

Chile and Colombia are set to grow just around 2 percent though, and Venezuela, mired in a deep political and economic crisis since oil prices plunged, is expected to shrink 3 percent in 2017 after an estimated drop of more than 10 percent in 2016.

Additional reporting by Miguel Gutierrez in Mexico City, Anthony Esposito in Santiago, Hernan Nessi in Buenos Aires and Ursula Scollo in Lima; Editing by Jeffrey Benkoe

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