2014-2015 Forecast Preview

Genevieve Signoret & Patrick Signoret

(Lea el adelanto de nuestra persectiva trimestral en español aquí.)

We’re preparing our quarterly outlook. What follows is a preview.

We extend our central scenario, which we now call Mexico Moment (subjective probability = 70%), to the end of 2015. Mexico’s GDP grows by 4.1% in 2014 and 4.5% in 2015. China and India slow down, developed economies accelerate little, oil prices slide, inflation stay tame, and monetary policy stances remain loose. The dollar appreciates against the euro and yen and the peso appreciates to $1.00=MXN12.70 in 2014 and 12.50 in 2015.

We also develop an upside risk scenario, Animal Spirits (probability=20%). In Animal Spirits, compared with Mexico Moment, emerging Asia grows faster, and Mexican housing construction recovers earlier. So does global inflation, and Banxico and the Fed raise interest rates in 2015. In developed markets, fixed investment recovers more quickly, and the euro and peso become stronger against the dollar. Equity markets roar.

Thirdly, we present a downside risk scenario, China Crisis (probability=10%). In it, a severe financial crisis breaks out in China. The Fed stops tapering, Banxico cuts rates, and the European Central Bank adopts quantitative easing. Global growth and inflation slow down. Investment grade bonds rebound. The equity bull market ends. And the peso weakens to $1.00=13.20–13.60.

This week Timón Económico and La Carpeta Negra will be on pause while we finish the quarterly and get it out to clients.