Is it the end of super weight?
“We anticipate that the exchange rate will close the year at levels around 18.00 pesos per dollar, which would imply a marginal depreciation of the Mexican peso with respect to current levels,” indicated the Mexico Situation report, from September 2023.
That is, although it is expected that the exchange rate will not return to the 16.68 pesos per dollar that it reached in July, there will not be a much higher depreciation than current levels. This Friday, for example, the parity closed at 17.42 pesos per dollar.
The elections will bring volatility for the peso in 2024
The BBVA report also notes that exchange rate volatility is expected in the months leading up to the June 2024 presidential elections.
The price of the dollar could reach levels of 19 pesos per unit in that period. However, “given Mexico’s solid macroeconomic fundamentals, this increased volatility will be transitory and will gradually dissipate once the electoral process has concluded.”
Finally, it considers that the exchange rate closes 2024 at levels of 18.80 pesos per dollar, which would be equivalent to an annual depreciation of 4.4% and which would be partly explained by the reduction in the interest rate differential between Mexico and the United States.
They revise growth upwards for 2023 and 2024
BBVA also revised upwards its estimate of Mexico’s economic growth for 2023 to 3.2% (2.4% previously) and anticipated growth of 2.6% in 2024 (1.8% previously).
Among the causes is that “consumption remains resilient driven by gains in real wages, employment and the lower savings rate among the highest income deciles.”
In addition, investment shows a positive performance favored by public investment and the rapid growth of the imported machinery and equipment component, given the normalization of production, the report noted.