Mexico‘s balance of payments current account was moderately in deficit during 2017-2019, but experienced a sizeable surplus in 2020, before returning to a deficit, albeit moderate, in 2021, according to a report by the World Trade Organization (WTO).
What is the balance of payments? Mexico’s Ministry of Economy explains that the balance of payments shows the inflow and outflow of foreign exchange (foreign currency) at the national level in terms of exports, imports, foreign labor income, transactions and capital.
That is, it records Mexico’s economic transactions with the rest of the world.
Current account and financial account of the balance of payments, 2016-2021.
The evolution of Mexico’s financial account allowed for an accumulation of reserves during most of the last five years.
According to WTO data, Mexico’s balance of payments current account deficit exceeded 20 billion each year of the 2016-2018 period, representing between 1.7% and 2.2% of GDP.
The behavior of the oil balance, the services balance and the primary income balance fundamentally explain these deficits.
On the other hand, the surplus in the secondary income account, particularly from remittances, continued to increase.
Balance of payments
The Covid-19 pandemic caused a sharp contraction in exports and imports of goods and services in 2020.
However, the drop in imports was larger, resulting in a balance of payments current account surplus of $26.21 billion, or 2.4% of GDP.
Then, in 2021, the trade balance recorded a deficit of US$14.491 billion (0.9% of GDP).
The Bank of Mexico (Banxico) forecasts that the current trade deficit in 2022 will be between $9 billion and $15 billion (-0.6 and -1.1% of GDP).
It also forecasts a current account balance between a surplus of US$1.8 billion and a deficit of US$8.2 billion (0.1 and -0.6% of GDP).
By 2023, a trade deficit of between $9.8 billion and $17.8 billion (-0.6% and -1.2% of GDP) and a current account balance of between a surplus of $1.9 billion and a deficit of $10.1 billion (0.1 and -0.7% of GDP) are forecast.