Thursday, December 7, 2023

OECD lops growth rate forecast to just 0.5% for 2019 from May’s 1.6%

The Organization for Economic Co-operation and Development (OECD) has cut its 2019 growth forecast for Mexico to just 0.5% from an outlook of 1.6% in May.

Published on Thursday, the OECD Interim Economic Outlook noted that “GDP growth has slowed sharply in Mexico this year, in part due to temporary factors such as strikes and higher policy uncertainty.”

Strikes closed scores of factories in Tamaulipas in January, while a prolonged rail blockade by teachers in Michoacán during the same month cost the economy billions of pesos. The Mexican economy contracted by 0.3% in the first quarter of the year.

The 1.1% cut to Mexico’s 2019 growth outlook is among the biggest downgrades the OECD made to its individual country forecasts in the report.

The forecast for 2020 was not spared the axe either.

The outlook said that “lower interest rates, strong remittances and the increase in the minimum wage should help [Mexico’s] GDP growth to strengthen to 1.5% in 2020,” down 0.5% from the 2% economic expansion the OECD predicted in its May Economic Outlook.

The newspaper El Economista noted that the outlook for next year is also below the government’s 2% growth target, on which the 2020 Economic Package is predicated.

The OECD revision is the latest in a long line of downgrades to the 2019 outlook for the Mexican economy, which recorded 0.0% growth in the second quarter of the year.

The International Monetary Fund cut its growth forecast to 0.9% in July, a 0.7% reduction compared to its April outlook, while Mexico’s central bank slashed its economic expansion expectation in August to a range between 0.2% and 0.7% from a May prediction of 0.8% to 1.8%.

The OECD also cut its 2019 and 2020 outlooks for Mexico’s largest trading partner, the United States, in Thursday’s report. The U.S. economy will grow by 2.4% this year and 2% in 2020, the OECD said, forecasts that are 0.4% and 0.3% lower, respectively, than those it made in May.

The Paris-based organization also said that “global growth is projected to slow to 2.9% in 2019 and 3% in 2020,” adding that “these would be the weakest annual growth rates since the financial crisis, with downside risks continuing to mount.”

Source: El Economista (sp)

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