Mexico Quarterly Update – February 2020

Mexico's real GDP contracted -0.3% yoy1 in 4Q19 – dipping further after the -0.2% of 3Q19. Private consumption has begun to show signs of improvement following two policy rate cuts in the fourth quarter, but real interest rates remain high; a drop in gross fixed investments hindered growth output due to trade policy uncertainty, and due to what seems to be a crowding out effect from government policies. Exports continue a path of moderation partially attributable to a stronger peso in the final months of the year.

Key takeaways:

• AMLO rounds up first year as president with disappointing growth.
• We continue to lower our projections, but we expect growth to accelerate starting in 2020
• Inflation remains properly anchored and we expect three rate cuts from the central bank in 2020.
• Life premiums continue to outpace non-life lines.
• Gains in the non-life loss ratios were offset by losses in the life segments; investment results continue to support profitability.
• Following higher than expected premium growth in 2019, we expect a moderation come 2020.