HSBC, Santander cut 2017 Mexico growth outlook on Trump risk

HSBC and Santander on Monday both cut their growth outlook for Mexico next year on expectations that Donald Trump's rise to the U.S. presidency could hit investment and consumer confidence in Latin America's No.2 economy.

Both banks said Mexican gross domestic product would expand about 1.7 percent in 2017. HSBC had previously forecast a 2.3 percent expansion, while Santander had a 2.2 percent rate.

Rating agency Moody's cut its 2017 GDP forecast to 1.9 percent from 2.5 percent on Monday.

Trump has threatened to unwind a free trade deal with Mexico and to block money sent home by migrant workers in the United States to pay for a wall on the border between the two countries.

Mexico sends around four-fifths of its exports to the United States, its top trading partner. U.S.-Mexico trade totalled more than US$580 billion last year.

"The result of the U.S. election is likely to have a significant impact on economic activity in Mexico in the coming years," HSBC economist Alexis Milo wrote.

A poll last week by Banamex before the outcome of the U.S. election had shown median expectations were for a 2.3 percent expansion of GDP next year. The economy grew 2.5 percent last year and is on track to grow about 2.1 percent this year, according to the Banamex poll.

Milo said the negative impact next year would likely be only moderate since any changes to trade could take some time to implement. He revised down his outlook mostly due to the expectation of less domestic and foreign investment in Mexico.

Santander said it revised its forecast lower on expectations of a slowdown in exports and private consumption.

"Trade protectionism may not be the top priority but some restrictions are very likely to emerge sooner or later and will have a direct impact on growth on both sides of the border," said Santander economist David Franco.