The Mexican Peso continues to trade a record lows against the American Dollar, the outlook for the Mexican economy still looks strong, according to financial analysts and economists. In fact, the Mexican Central Bank is projecting that the economy will grow between 2.5 and 3.5% in 2016 and the consensus of economic forecasters is that the country will see 3% economic growth. But what are the challenges facing the Mexican economy for 2016?
1) Mexico is the 9th largest oil producing country in the world, so plunging oil prices have a massive effect on the economy. However, in 2015, a strong USD helped to bring a 7.1% growth to the hospitality and tourism sectors, helping to offset losses in the oil sector.
2) Inflation reached a record low of 2.5% in October, which is below Mexican Central Bank target set at 3%. The forecast for 2016 is again predicted to be 2 to 3% by most economic forecasters.
3) Consumer confidence and spending is up, with retail sales growing 6.2% in 2015. With a weak peso, it remains to be seen if those numbers will increase as Mexican consumers prefer to keep their spending in Mexico and not make foreign purchases.
4) Corruption continues to be a systemic issue in Mexico with estimates that corruption caused a 9% hit to Mexico’s gross domestic product (GDP) in 2014.
However, the Mexican economy continues to be the strongest in Latin American and despite a weak Mexican peso, indicators show that Mexico will continue its growth to become a powerhouse on the global economic scene within the next 10 years.
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