The deviation of the current account deficit from its original projection is explained almost entirely by lower oil prices. The country's favorable economic performance was also made possible by the efforts undertaken in the past three years to strengthen Mexico's fundamentals. Mexico's short-term public sector external debt has been significantly reduced, the public sector amortization schedule for the next two years is consistent with the availability of external resources, and none of the country's domestic debt is indexed to the exchange rate. The flexible exchange rate regime has been helpful in deterring short-term capital inflows and in avoiding the accumulation of external imbalances that could potentially induce a balance of payments crisis. The current account deficit has been kept within sustainable levels dictated by the availability of foreign direct investment.
International reserves stand at historical highs.
In fact, Mexico is one of the few emerging markets that in 1998 will be able to accumulate reserves while at the same time running a current account deficit. Global economic growth in 1999 will be lower than in 1998, capital inflows will be scarcer and commodity prices will not recover from their current low levels. Provide the economy with the required fiscal and financial discipline in order to achieve a smooth transition into the next administration. In particular, domestic consumption and investment will be important contributors to the expansion of economic activity and exports will continue their strong performance. As a result of low oil prices and a slowdown of growth in the United States, it is expected that the growth rate of exports in 1999 will be more moderate than in 1998.