Background on Mexico’s Current Account Deficit
Mexico’s current account registered a deficit of $7,613 million during the first quarter of 2024, according to Banco de México (Banxico).
This deficit equated to 1.8% of the Gross Domestic Product (GDP), which is one-third of the deficit recorded in the same period last year, equivalent to 4.7 percentage points of GDP.
Expert Analysis by Alberto Ramos
Alberto Ramos, economist for Latin America at Goldman Sachs, stated that the first-quarter deficit was “significantly better than expected and much more moderate than the deficit of the same period last year.”
Ramos attributes this improvement to a stronger trade balance, moderately higher remittances, a stronger services balance, and a significantly smaller deficit in the income balance. The income balance incorporates remittances, profits, and dividends.
Ramos anticipates that the current account balance will remain close to zero for the rest of the year, given moderate growth prospects.
Historical Context and Volatility
Over the past three years, Mexico’s external accounts have shown volatility in the current account balance. This leaves Mexico vulnerable to conditions set by the United States, according to Ramos.
When examining quarterly changes from January-March 2021, Mexico’s current account has alternated between deficit and surplus quarters without establishing a clear trend.
- Deficit quarters: First and third quarters of 2021, first three quarters of 2022, first quarter of 2024, and the current quarter (January-March 2024).
- Surplus quarters: Second and fourth quarters of 2021, last quarter of 2022, second, third, and fourth quarters of 2023, and from the second quarter to the fourth quarter of 2024.
Key Questions and Answers
- What is the current account deficit in Mexico? The current account deficit in Mexico was $7,613 million during the first quarter of 2024, equivalent to 1.8% of GDP.
- Who is Alberto Ramos, and why is he relevant? Alberto Ramos is an economist for Latin America at Goldman Sachs. His analysis of Mexico’s current account deficit is relevant because he provides insights into the factors contributing to the moderation of the deficit.
- What factors led to a more moderate current account deficit in Q1 2024? The factors include a stronger trade balance, moderately higher remittances, a stronger services balance, and a significantly smaller deficit in the income balance.
- What are the prospects for Mexico’s current account balance for the rest of 2024? According to Ramos, the current account balance is expected to remain close to zero for the rest of 2024 due to moderate growth prospects.
- Why is Mexico vulnerable to current account balance fluctuations? Mexico’s external accounts have shown volatility in the current account balance over the past three years, making it vulnerable to conditions set by the United States.
