The Mexican economy slowed significantly in 2013, although mainly in the first half of the year, as the pace of growth picked up in the second half. Overall, GDP barely grew by just above 1%. This sluggish growth was due to the weak performance of the industrial sector linked to foreign demand, but also to the decrease in public investment. Moreover, Mexico has not been isolated from the volatility caused by the tapering in the United States, although it has resisted better than other emerging economies. Despite the upturn in the fourth quarter, inflation has remained under control, particularly in its core component. The Central Bank of Mexico (Banxico) was therefore able to make a further cut in its rates in the second half of the year to boost growth, thus applying a more expansive monetary policy. In 2013, Banxico cut rates by 100 basis points. A reform package was also presented as part of the Pact for Mexico promoted by the new government. In general, the reforms put forward up to the end of 2013 (labor, telecommunications, financial, fiscal and energy) have been well received, although many of the details of their implementation still have to be made known. An appropriate implementation would increase the growth potential of the Mexican economy.
Against this background, the final exchange rate of the Mexican peso against the euro depreciated by 4.9% over the year, leaving the average rate at a very similar figure to that of 2012, with only a slight year-on-year depreciation of 0.3%. This pattern has a negative effect on the comparison of the balance sheet and activity of the area, although in earnings the effect is practically neutral over the year. As in previous reports, all the comments that refer to percentage changes will be expressed at constant exchange rates, unless expressly stated otherwise.
The country’s banking system has remained strong in 2013, with good asset quality, sound capitalization levels and good indicators of profitability and efficiency. Moreover, most of the industry’s funding comes from local-currency deposits. This has protected the sector from the turbulence in international financial markets. In a statement published following its meeting on September 30, the Financial System Stability Council (CESF) pointed out that although Mexico has not escaped the volatility of the international financial markets in the second half of 2013, the strength of its financial system and clear, transparent and predictable policies have combined to ensure a more limited impact and milder adjustments than in other emerging economies.
Lastly, on November 22, 2013, Banxico published its report on the Mexican banking system, highlighting its strength, high level of solvency and profitability, but also lower rate of growth. The lagging growth in the first part of 2013 prompted a slowdown in credit growth (a rise of 7.8% year-on-year as of December 2013, compared with 11.2% on the same date the previous year, according to figures by the National Banking and Securities Market Commission CNBV), and an upturn in the NPA ratio, largely concentrated among companies in the residential construction sector and in certain consumer finance segments.
