Weekly Report - 31 July 2014 (WR-14-30)

MEXICO| Record savings. On 29 July Mexico’s national banking and securities commission (CNBV) revealed that the overall level of savings deposited in Mexico’s domestic financial system reached a new record of M$14.3trn(US$1.097bn) last year, representing 85.8% of the country’s GDP and a 6.8% year-on-year increase. The record level of savings observed last year should help boost the level of credit available for Mexican borrowers. This is one of the objectives of the banking reform recently approved by the government led by President Enrique Peña Nieto as parts of its efforts to increase investment in the domestic economy. A CNBV report highlighted that the new savings ratio is substantially higher than in 2000 when it equalled 51.5% of GDP, noting that the sustained increase “denotes the confidence in the soundness of Mexico’s financial system”. According to the report, while the level of savings has been growing consistently since 2000, the increase has been more pronounced between 2007 and 2012, when the savings ratio went from 60% of GDP in 2007 to 80.2% of GDP in 2012. The ratio’s rate of increase last year was comparatively lower but savings still grew by 5.6 percentage points. Significantly, the CNBV data shows that the rise in savings since 2007 has been driven by constant increases in the level of foreign savings (savings deposited by foreign firms and individuals) and in domestic fixed income assets (public and private sector bonds), which appears to confirm the growing level of confidence that foreign and domestic investors have in the Mexican economy. However, despite the increase in savings levels, the CNBV report underlines that the availability of credit to the private sector still remains low. According to the CNBV data, the availability of credit to the private sector last year amounted to 28.3% of GDP, just 2.4 percentage points higher than in 2012. Following the approval of the banking reform, the Peña Nieto government said that it expected that the availability of credit to the private sector to rise to 40% of GDP by the end of its six-year term in 2018. A lot more work needs to be done in order for this target to be achieved.

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