Mexico faces high uncertainty in 2018 due to elections, NAFTA

MEXICO CITY, Jan. 16 (Xinhua) -- The Mexican economy will face a high degree of uncertainty in 2018 due to presidential elections and the renegotiation of North American Free Trade Agreement (NAFTA), the Mexican Institute of Finance Executives (IMEF) stated on Tuesday.

In its first report of 2018, IMEF's president Fernando Lopez said the exchange rate would be the main variable absorbing the shocks of this uncertainty.

"While the average expectation for the exchange rate at the end of the year stands at 19.10 pesos per dollar, this does not mean we will not see a rise in volatility," said Lopez.

The Mexican currency, one of the most traded among emerging markets, has seen pressure for months due to NAFTA, fiscal reforms in the U.S. and the upcoming elections.

On Tuesday, the peso closed at 18.77 to the dollar, but the IMEF expects it will stand at 19.10 at the end of year, higher than its 18.75 prediction last December.

"It is likely the peso will depreciate in the first half of the year and will appreciate in the second semester after the risk event, that the presidential elections represent, has passed," Lopez told a press conference.

In terms of economic matters, the IMEF predicts a 2.3 percent economic growth for Mexico in 2018.

For inflation, IMEF projects an increase of 4.1 percent at the end of 2018. Mexican inflation ended 2017 at its highest level since 2001, largely fuelled by the depreciation of the exchange rate and increased fuel costs.

"We do not anticipate relevant inflationary pressures, except those that may emerge in a few more months, if the exchange rate continues to see important depreciation as the day of the election approaches," said Lopez.

Mexico will elect a new president in July. Enditem