The Organization for Economic Co-operation and Development (OECD) has made upward revisions to its economic growth forecasts for Mexico in both 2023 and 2024.

In an interim Economic Outlook report published on Tuesday, the Paris-based organization forecast that GDP will grow by 3.3% in Mexico this year and 2.5% in 2024.

The former forecast is 0.7 percentage points higher than the prediction the OECD made in June, while the latter is 0.4 percentage points higher.

One factor contributing to the improved outlook for Mexico is that the OECD believes that the United States economy will perform better this year and next than it previously anticipated.

The organization, led by former Australian finance minister Mathias Cormann, increased its growth forecasts for the U.S. economy to 2.2% for this year and 1.3% for next year, improvements of 0.6 and 0.3 percentage points, respectively.

The Mexican and United States economies are integrated to a significant extent due to the impact of the current North American free trade agreement, called USMCA, and its predecessor NAFTA. Mexico was the United States’ largest trade partner in the first six months of 2023, with the value of the exchange of goods between the two countries reaching a record high of almost US $400 billion.

The current strength of the labor market, the gradual decline in inflation this year, the federal government’s welfare spending and infrastructure projects, the growing nearshoring phenomenon and record-high inflows of remittances are among other factors currently benefiting the Mexican economy.

According to a recent Bank of Mexico report, GDP increased 3.7% in annual terms in the first quarter of 2023 and 3.6% in the second quarter. National statistics agency INEGI published preliminary data on Tuesday that showed that the economy grew 3.4% in August compared to the same month of last year.

The OECD also made an upward revision to its forecast for the global economy this year, raising its outlook to 3% from 2.7% in June. It anticipates a worldwide expansion of 2.7% in 2024, a reduction of 0.2 percentage points compared to its previous prediction.

“Global GDP growth is projected to remain sub-par in 2023 and 2024, at 3% and 2.7% respectively, held back by the macroeconomic policy tightening needed to rein in inflation,” the OECD said.

Mexico News Daily