Mexico's Economic Outlook in Five Charts
IMF News, November 8, 2018
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- Published: November 8, 2018
Growth outlook and near-term drivers
- Mexico's economy grew moderately in 2018, supported mainly by domestic demand.
- Growth projections:
- 2.1 percent for 2018
- 2.3 percent in 2019
- Drivers and headwinds:
- Growth will benefit from strong economic activity in the United States in both years.
- Continued tight monetary policy and uncertainty related to both the incoming administration’s policies and trade relations with the US will continue, thus dampening growth.
Public debt and fiscal stance
- Current public debt level:
- 54 percent of GDP
- Fiscal policy metrics and implications:
- Keeping the overall fiscal deficit at 2.5 percent of GDP over the medium term would stabilize debt at around the current level, assuming that medium-term growth increases to around 3 percent and the interest rate path remains steady.
- A slightly more ambitious target would improve budgetary spending room to deal with large infrastructure needs, high levels of poverty and inequality and the fiscal costs of an aging population.
Poverty, inequality, and social policy
- Key statistics:
- Poverty: over 43 percent of the population
- Inequality: Gini Index of almost 50
- Causes and policy observations:
- Mexico’s meager per capita growth in recent decades contributes to high poverty rates.
- Social policies have not been targeted as well as they could have been.
- Conditional cash transfer programs have been very effective at reducing inequality.
- Other social programs have disproportionately benefited individuals at the top rather than at the bottom of the income distribution.
- The redistributive role of fiscal policy is generally weaker in Mexico than in other members of the Organisation for Economic Co-operation and Development (OECD) and could be expanded.
Security, rule of law, and economic costs
- Security trends and economic impact:
- Mexico experienced its most murderous year on record in 2017, and incidences of theft have also been on the rise.
- High levels of crime impose direct and indirect economic costs due to damages and the need for costly security measures.
- Firms may limit their activities and cancel investment plans in response to a weak security situation; small firms suffer these consequences disproportionately in Mexico.
- Pemex is dealing with a continuous rise in pipeline taps with sizable costs to the firm’s operations.
- Policy priority:
- Improving security and strengthening the rule of law is critical to reducing crime and promoting economic activity.
Female labor force participation and gender gaps
- Labor market observations:
- Improving gender gaps in the country is vital for economic growth.
- Despite significant improvements in female labor market participation and pay equality, women remain heavily underrepresented in the Mexican economy.
- Lowering participation gaps for mothers remains a priority.
- Policy levers:
- Childcare and maternity and paternity benefits remain well below OECD peers and could help close participation gaps.
Source: Mexico's Economic Outlook in Five Charts (IMF News, November 8, 2018).