OECD's interim growth outlook, published today. OECD's interim growth outlook, published today.

OECD raises outlook for Mexico growth

Forecast is for 2.5% this year and 2.8% in 2019, up 0.3% and 0.5% from November

The Organization for Economic Co-Operation and Development (OECD) has upgraded its growth forecasts for the Mexican economy for both this year and next.

In its Interim Economic Outlook released today, the OECD said that Mexico’s gross domestic product (GDP) will grow by 2.5% this year and 2.8% in 2019.

The figures represent a 0.3% and 0.5% increase respectively on OECD November numbers.

“Growth in the United States, Germany, France, Mexico, Turkey and South Africa is projected to be significantly more robust than previously anticipated, with smaller upward revisions in most other G20 economies,” the outlook said.

Referring specifically to Mexico, the 35-member economic organization said that “fiscal and monetary policies are relatively tight, but strong global demand growth, resilient private consumption and reconstruction spending are all projected to support output growth in 2018-19.”

The report also said that inflation is set to rise modestly across OECD countries and included Mexico among three countries where “past currency declines and a relatively strong sensitivity to commodity price fluctuations are currently adding to inflation pressures.”

However, if inflationary pressures subside, the OECD suggested that it may be possible for Mexico to ease interest rates, which are currently set at 7.50%.

The higher projected growth figures come despite continuing uncertainty surrounding the outcome of negotiations to modernize the North American Free Trade Agreement (NAFTA).

United States President Donald Trump last week announced that Mexico will be initially exempt from new tariffs on steel and aluminum imports but framed the concession as conditional on reaching an updated NAFTA agreement that better favors the U.S. It is still unclear whether the exemption will be made permanent.

Despite fears that the new protectionist measures could trigger a trade war, the OECD still projected that the world economy will continue to strengthen in 2018 and 2019.

Global growth of 4% is expected this year, a 0.3% increase on last year.

Source: Milenio (sp)

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