Weaker-Than-Forecast Remittances Cloud Mexico’s Growth Outlook

Maria Eloisa Capurro, Bloomberg News

Mexican 500 peso banknotes depicting the image of Benito Juarez, Mexico's former president, are arranged for a photograph in Tepic, Nayarit state, Mexico, on Saturday, Sept. 22, 2018. Mexico's peso halted a three-day losing streak, briefly revisiting its 200-day moving average as the dollar index retreated after U.S. September inflation numbers undershot estimates. Photographer: Cesar Rodriguez/Bloomberg , Bloomberg

(Bloomberg) -- Mexicans abroad sent home less money than expected in March in another blow to the cooling economy.

Total remittances fell to $5.02 billion, down 3% from a year earlier, the central bank said Thursday. The median forecast of analysts surveyed by Bloomberg was $5.3 billion.

In local currency terms, the fall was even more pronounced, since the peso has been the world’s top-performing major currency over the last 12 months, strengthening 6.2%.

Growing remittances from the buoyant US economy have been one of the biggest drivers of Mexico’s economic growth in recent years, along with “near-shoring”, whereby companies move far flung factories closer to the US. However, the economy expanded just 0.2% during the first quarter as high real interest rates damp demand.

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“The significant appreciation of the Mexican peso is eroding the pull of remittances on consumption,” wrote Alberto Ramos, director for Latin America at Goldman Sachs & Co. After adjusting for the peso’s appreciation, remittances in local currency terms fell 11.5% over the year, he estimates.

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