February 25, 2020 / 6:10 PM / a month ago

Weak economy fuels smallest Mexican current account deficit since 1995

Workers are seen in a building undergoing construction at Mexico City, Mexico January 30, 2020. REUTERS/Andres Martinez Casares

MEXICO CITY (Reuters) - Mexico posted its smallest current account deficit in 24 years during 2019 as sluggish investment crimped spending on capital goods even as the U.S. trade dispute with China supported exports, official data showed on Tuesday.

Mexico’s current account deficit narrowed to $2.444 billion from $23.004 billion a year earlier, the central bank figures showed. It was the smallest deficit since 1995, when Mexico suffered a severe recession, the data showed.

The current account deficit was equivalent to 0.2% of gross domestic product (GDP), the smallest since Mexico ran a surplus in 1987, according to central bank data.

Aside from the January-March period, Mexico ran up current account surpluses in all remaining quarters as businesses reined in investment on plant and equipments, curbing the outflow of dollars from Latin America’s second-biggest economy.

“These figures are consistent with an economy that isn’t growing,” said Benito Berber, chief Mexico economist for bank Natixis. “When there’s economic contraction you’re obviously importing less,” he added.

Mexican firms have been unsettled by President Andres Manuel Lopez Obrador’s economic policies, helping to push the country last year into its first recession in a decade.

At the same time, Mexico last year became the United States’ biggest trade partner as U.S. President Donald Trump’s tariff war with China put a major dent in U.S.-Chinese commerce.

A breakdown of the central bank’s current account data showed that goods exports last year rose to $461.1 billion from $450.7 billion a year earlier. By contrast, goods imports slipped to $455.3 billion from $464.3 billion in 2018.

Mexico posted a current account surplus of $2.486 billion during the October-December period, the data showed.

Reporting by Dave Graham and Abraham Gonzalez; editing by Drazen Jorgic and Grant McCool

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