Economic Outlook 2011 February 2011
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Transcript of Economic Outlook 2011 February 2011
Economic Outlook 2011
February 2011
Secretaría de Hacienda y Crédito Público
22
Discipline in public finances has led to a moderate deficit and a declining trend in public debt.
General Gov. Financial Deficit 2010(% of GDP)
* Observed 2010** Approved 2011Source: SHCP, S&P (May 2010) for the rest.
Public Sector Debt(% of GDP)
Source: SHCP
Discipline in Public Finances
0
2
4
6
8
10
12
Mex
ico
*M
exic
o**
BB
B M
edia
nIn
dia
Lit
hu
ania
So
uth
Afr
ica
Hu
ng
ary
Cro
atia
Tu
nis
iaR
uss
iaB
ulg
aria
Bra
zil
Per
u
Oth
ers
Med
ian
Irel
and
Sp
ain
Jap
anG
reec
eP
ort
ug
alR
um
ania
Ital
y30.9 30.7
30.129.5
28.8
28.2
35.2 35.134.8
34.333.7
33.0
27.0
28.0
29.0
30.0
31.0
32.0
33.0
34.0
35.0
36.0
2010 2011 2012 2013 2014 2015
Net Debt HBPSBR
8.36
8.57
8.96
9.34
9.96
9.52
10.00
10.36
8.0
8.5
9.0
9.5
10.0
10.5
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11e
13.8
16.8
25.0
28.9 29.631.3
34.1
38.9
10
15
20
25
30
35
40
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
3
There have been important efforts to substitute oil revenues and strengthen public finances.
Significant progress has been made in expanding the tax base and in increasing tax revenues in recent years.
Number of Tax Payers(millions)
Non-Oil Tax Revenues(% of GDP)
Source: SHCP Source: SAT
Tax Revenues
4
Oil Production(thousand barrels per day)
The oil production platform has stabilized in the last years.
The oil price was hedged for 2011.
Source: PEMEX
Oil Production
0
500
1,000
1,500
2,000
2,500
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11e
Cantarell Rest
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
0 3 6 9
12
15
18
21
24
27
30
33
36
39
UMS 11UMS 12
UMS
UMS 14 N
UMS15
UMS 19
UMS 22
UMS 31
UMS 34
UMS 26
UMS 17
UMS 19N
UMS 14
UMS 20
UMS 40
UMS 110
Financing Transactions in the U.S. Dollar Market
External Debt(dollars)
Average Life in Years
100
5
Source: SHCP
Debt Management
Domestic Debt(pesos)
Source: SHCP
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10 20 30
Yie
ld (
%)
Maturity (years)
2005 2010
6
Inflation and Interest Rates
Even though inflation suffered a temporary increase at the end of last year due to an increase in agricultural product prices, it remains below the crisis.
Domestic interest rates are close to historical minimums, even with the recent increase due to market uncertainty associated with the European crisis and the events in Egypt.
Government Bonds(%)
Source: Banxico and SHCP
Inflation Forecast(%)
2011
Inflation 2010: 4.52%
2010
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
Fe
b-0
3
Oc
t-0
3
Ju
n-0
4
Fe
b-0
5
Oc
t-0
5
Ju
n-0
6
Fe
b-0
7
Oc
t-0
7
Ju
n-0
8
Fe
b-0
9
Oc
t-0
9
Ju
n-1
0
Fe
b-1
1
5 years 10 years 20 years 30 years
7
Sovereign Risk
Mexico’s sovereign risk and the differential between long term domestic and foreign rates are close their historical minimum.
Source: JP Morgan
EMBI Global(basis points)
Interest Spread Mexico and United States(local rates on Government bonds, %)
Source: SHCP
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Fe
b-0
9
Ap
r-0
9
Ju
n-0
9
Au
g-0
9
Oc
t-0
9
De
c-0
9
Fe
b-1
0
Ap
r-1
0
Ju
n-1
0
Au
g-1
0
Oc
t-1
0
De
c-1
0
Fe
b-1
1
5 years 10 years 30 years
100
200
300
400
500
600
700
800
900
1000
0200400600800
100012001400160018002000
De
c-0
8F
eb
-09
Ap
r-0
9J
un
-09
Au
g-0
9O
ct-
09
De
c-0
9F
eb
-10
Ap
r-1
0J
un
-10
Au
g-1
0O
ct-
10
De
c-1
0
Argentina Brazil Mexico Composite
8
With a capital level which is twice the regulatory minimum and a healthy portfolio, development banks are positioned to continue contributing to the expansion of bank credit to the productive and housing sectors.
Delinquency Rate and Capitalization Index (%)
Source: Banxico
Financial System
17.3
2.4
18.3
4.5
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0
CAPI
DR
2006 nov-10
CAPI: Regulatory Minimum%
9
International reserves amount to 119.5 thousand million dollars (February 18, 2011).
Additionally, Mexico requested the renewal of the Flexible Credit Line with the IMF for two more years and 72 thousand million dollars.
Source: Banxico
International Reserves(thousand million dollars)
Risk Management
The Mexican government contracted an oil price hedge for 2011.
The government has the budgetary and financial capacity to respond to natural disasters for up to 50 thousand million pesos.
Feb-08
Apr-08Jul-08
Sep-08
Dec-08
Feb-09
May-09Jul-09
Oct-09
Dec-09
Mar-10
May-10
Aug-10
Oct-10
Dec-10
70
75
80
85
90
95
100
105
110
115
120
10
The ranking measures the behavior in 183 countries of the following variables:
1. Starting a business2. Dealing with construction permits3. Registering property4. Getting credit5. Protecting investors6. Paying taxes7. Trading across borders8. Enforcing contracts 9. Closing a business
Mexico is ranked as the best country to establish a business in Latin America.
Source: World Bank.
Deregulation and Simplification
127
115
43
39
36
35
1
0 50 100 150
Brazil
Argentina
Chile
Colombia
Peru
Mexico
Singapore
Ranking 2011 Doing Business
11
United States
The United States economy is expected to accelerate during 2011. Expected growth for GDP and industrial production is 3.1 and 4.2%.
The new fiscal stimulus of 2.7% of GDP for 2011 implies upside opportunities for United States growth.
GDP Growth Forecasts(ann. quarterly growth %)
Source: Blue Chip.* Forecasts.
Industrial Production Growth Forecasts (ann. quarterly growth, %)
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
III-0
9
IV-0
9
I-1
0
II-1
0
III-1
0
IV-1
0
I-11
*
II-11
*
III-1
1*
IV-1
1*
1.5
2.5
3.5
4.5
5.5
6.5
7.5
8.5
9.5
III-0
9
IV-0
9
I-1
0
II-1
0
III-1
0
IV-1
0
I-11
*
II-11
*
III-1
1*
IV-1
1*
12
The high deficit and debt situation in Europe continues to cause stress.
2011 Expected Public Deficit(% of GDP)
Source: IMF and SHCP
Europe
*Without PEMEX investment.Source: IMF and SHCP
2011 Expected Public Debt(% of GDP)
0
2
4
6
8
10
12
Me
xic
o*
Me
xic
o
Ge
rma
ny
Au
str
ia
Ita
ly
Be
lgiu
m
Ne
the
rla
nd
s
Po
rtu
ga
l
Fra
nc
e
Sp
ain
Gre
ec
e
Ire
lan
d
20
30
40
50
60
70
80
90
100
110
120
Me
xic
o
Ne
the
rla
nd
s
Ge
rma
ny
Sp
ain
Au
str
ia
Fra
nc
e
Po
rtu
ga
l
Be
lgiu
m
Ita
ly
Ire
lan
d
Gre
ec
e
13
Private sector growth forecast for 2011 have been revised upwards.
Given the delay in the revisions, forecasts for 2011 do not consider the new fiscal stimulus in the U.S.
The income per capita is greater than other emerging economies.
Economic Growth
PIB 2011
[4 - 5%]
GDP per capita* (thousand dollars)PIB 2010
5.5 %
India China Brazil Mexico Russia 0
4
8
12
16
20
3.3
7.5
11.3
14.315.8
Source: IMF. *Based on purchasing power parity (PPP).** Observed 2010.
Source: SHCP
Source: INEGI
90
92
94
96
98
100
102
104
106
I 20
07
II 2
00
7III
20
07
IV 2
00
7I 2
00
8II
20
08
III 2
00
8IV
20
08
I 20
09
II 2
00
9III
20
09
IV 2
00
9I 2
01
0II
20
10
III 2
01
0
Recuperación Económica: Mercado Interno
14
Total private consumption has picked up significantly since the second semester of 2009.
Investment is gradually accelerating.
Private Consumption(index, I 2007=100)
Gross Fixed Investment(index, I 2007=100)
92
94
96
98
100
102
104
106
108
110
I 20
07
II 2
00
7
III 2
00
7
IV 2
00
7
I 20
08
II 2
00
8
III 2
00
8
IV 2
00
8
I 20
09
II 2
00
9
III 2
00
9
IV 2
00
9
I 20
10
II 2
01
0
III 2
01
0
Source: INEGI. Source: INEGI.
Domestic Driver
Employment(monthly growth, 3m mov. avg., adjusted,
thousands)
Unemployment Rate, 2010(%)
The expansion in employment has continued, and all jobs lost during the crisis have been recovered.
Source: IMSS
Recuperación Económica: Mercado Interno
-120
-100
-80
-60
-40
-20
0
20
40
60
80
100
Fe
b-0
8
Ap
r-0
8
Ju
n-0
8
Au
g-0
8
Oc
t-0
8
De
c-0
8
Fe
b-0
9
Ap
r-0
9
Ju
n-0
9
Au
g-0
9
Oc
t-0
9
De
c-0
9
Fe
b-1
0
Ap
r-1
0
Ju
n-1
0
Au
g-1
0
Oc
t-1
0
De
c-1
0
Source: The Economist
Domestic Driver
730,000 new jobs created in 2010
15
20.2
9.4 8.67.6 7.5 7.4 7.1
5.3 4.9
0
5
10
15
20
25
Sp
ain
Un
ite
d
Sta
tes
Ita
ly
Ca
na
da
Arg
en
tin
a
Ge
rma
ny
Ch
ile
Bra
zil
Me
xic
o
16
ANTAD Sales(index, jan-07 = 100, adjusted, 3m. moving avg.)
Wal-Mart Sales(index, jan-07 = 100, adjusted, 3m. moving avg.)
16
The recovery of the domestic market is observed in the increasing trend of retail sales.
Recuperación Económica: Mercado InternoDomestic Driver
Source: INEGI. Source: SHCP with information from Wal-Mart.
95
100
105
110
115
120
125
Ja
n-0
7
Ma
y-0
7
Se
p-0
7
Ja
n-0
8
Ju
n-0
8
Oc
t-0
8
Fe
b-0
9
Ju
n-0
9
No
v-0
9
Ma
r-1
0
Ju
l-1
0
De
c-1
0
95
100
105
110
115
120
125
Ja
n-0
7
Ma
y-0
7
Se
p-0
7
Ja
n-0
8
Ma
y-0
8
Se
p-0
8
Ja
n-0
9
Ma
y-0
9
Se
p-0
9
Ja
n-1
0
Ma
y-1
0
Se
p-1
0
Ja
n-1
1
17
Fundamentales de la Economía
From 2000 to 2006 average annual budgetary investment in infrastructure was 3.5% of GDP, from 2007 to 2011 it will be 4.5% of GDP.
Domestic Driver
Fostered Investment in Infrastructure2000 – 2011
(2011 thousand million dollars)
* Approved 2011
Investment Expenditure2002 – 2011(% of GDP)
Source: SHCP Source: SHCP
3.1
3.5 3.6
3.9 4.0 4.1 4
.3
4.8
4.8
4.8
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11e
41
.0
51
.9
30.0
35.0
40.0
45.0
50.0
55.0
Average 2000-2006 Average 2007-2011
* Approved 2011
The Mexican banking system is solid and since the second quarter of 2010 positive monthly growth in credit has been observed.
18
Commercial and Development Bank Credit to Private Sector (monthly change, 3m. moving avg., %)
Source: Banxico
Domestic Driver
-3
-2
-1
0
1
2
Jun
-09
Jul-
09
Au
g-0
9
Sep
-09
Oct
-09
No
v-0
9
Dec
-09
Jan
-10
Feb
-10
Mar
-10
Ap
r-10
May
-10
Jun
-10
Jul-
10
Au
g-1
0
Sep
-10
Oct
-10
No
v-1
0
Dec
-10
Total Consumption Housing Firms
0.0
0.5
1.0
1.5
2.0
2.5
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
E
20
10
E
China Mexico
19
Besides from the recovery associated with the global industrial cycle, Mexican manufacturing will benefit from a more competitive exchange rate.
Real Exchange Rate(index, Jan-05=100)
Hourly Wage in Manufacturing(dollars)
Source: Central Banks. Source: International Labor Organization
237.9%
13.8%
External Driver
50
60
70
80
90
100
110
120
130
Ja
n-0
5
Ju
n-0
5
De
c-0
5
Ju
n-0
6
De
c-0
6
Ju
n-0
7
De
c-0
7
Ju
n-0
8
De
c-0
8
Ju
n-0
9
De
c-0
9
Ju
n-1
0
De
c-1
0
China Mexico Brazil
20
Non-oil exports have increased since 1993 as a result of Mexico’s comparative advantages.
Non-oil exports have recovered from the recent crisis.
Source: Banxico
Mexico is the most competitive country in auto parts manufacturing (KPMG). One of every 7 cars circulating in the
U.S. is manufactured in Mexico.
The Mexican aerospace industry occupies the first place in
manufacturing investment in the world (Deloitte).
Mexico is the biggest producer of smart phones in the world and the
second greatest exporter of television sets.
Non-Oil Exports(monthly, adjusted, million dollars)
External Driver
0
5,000
10,000
15,000
20,000
25,000
De
c-9
2
De
c-9
4
De
c-9
6
De
c-9
8
De
c-0
0
De
c-0
2
De
c-0
4
De
c-0
6
De
c-0
8
De
c-1
0
21
Concluding Remarks
• 2011 will be a second year with a solid economic growth.
• Balanced growth between the export sector and the domestic market.
• The soundness of the development banking system and the active participation of commercial banks contributed to the recovery of construction and housing finance in 2010.
• In 2011, Government policies will focus on green and sustainable housing as well as reducing the housing deficit.
Human Development
The living standards of the Mexican population have improved. The Human Development Index measures education, health and per capita
income.
1990 1995 2000 2005 2006 2007 2008 2009 20100.40
0.45
0.50
0.55
0.60
0.65
0.70
0.75
0.80
HDI
Human Development Index
Chile, 0.78
Mexico, 0.75Russia, 0.72Brasil, 0.70China, 0.66
India, 0.52
Source: United Nations Development Program (UNDP)
22