Poverty remains stagnant, says OECD. Poverty remains stagnant, says OECD.

Slight increase in OECD growth forecast

But at 2.2% the figure for next year is still lower than this year's 2.4%

The Mexican economy will grow by 2.4% this year and 2.2% in 2018, according to an upwardly revised forecast by the Organization for Economic Cooperation and Development (OECD).

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The revisions were published as part of the annual OECD Economic Outlook.

Growth projected for this year is up 0.5% on the figure it published in June while the forecast for next year represents a 0.2% improvement on numbers published the same month.

“Growth is holding up above 2% despite the uncertain environment, fiscal consolidation and tighter monetary conditions,” the OECD said.

The figures are slightly higher than those forecast by the Bank of México for this year. It is anticipating growth between 1.8% and 2.3%. The central bank’s growth estimate of between 2% and 3% for next year is in line with the OECD outlook.

The OECD numbers are also more optimistic than forecasts by both the International Monetary Fund (IMF) and the World Bank, which predicted growth this year of 2.1% and 2.2% respectively.

The OECD outlook cited “the materialization of delayed investments [and] recent successful tenders in the energy sector” as factors contributing to the improved forecast, adding that “recent reductions in administrative burdens are expected to boost entrepreneurship and raise business investment.”

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It also flagged an upturn in the construction sector as a result of the September 7 and September 19 earthquakes, which devastated parts of southern and central Mexico.

“Construction activity will pick up from its historically low levels, reflecting reconstruction after the September earthquakes,” the OECD said.

Another positive cited is that “corporate and household debt is low and homeowners hold large financial and non-financial assets.”

However, not all of the data and detail paint such a rosy picture.

“While recent reforms have increased job formalization and improved financial inclusion, poverty remains stagnant and large inequalities persist,” the OECD stated.

“Private and public investment, including by Pemex and other state-owned enterprises, has also been weak, owing to heightened uncertainty and fiscal consolidation” it continued, adding that “inflation has soared to well above the central bank’s target as a consequence of the accumulated depreciation of the peso and progressive liberalization of domestic fuel prices throughout 2017.”

OECD economists also consider uncertainty surrounding the future of the North American Free Trade Agreement (NAFTA) as a potential risk to the Mexican economy.

“Going forward, the uncertainty generated by the NAFTA renegotiations could persist and even intensify, further delaying investment and the realization of the gains brought by recent structural reforms,” the OECD warned.

“The economy is exposed to external shocks, particularly those related to changes to economic and trade policies in the United States,” it added.

However, if Mexico, the United States and Canada can successfully reach a renewed agreement, the OECD said that ” a strengthened commitment regarding economic integration would raise confidence and spur investment and productivity growth.”

The outlook summary for Mexico concluded by suggesting that “continuing to build the capacity of sub-national level entities involved in the new anti-corruption system, and boosting training, resources and technology for the judiciary, would improve the business climate and encourage investment.”

Source: El Economista (sp)

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  • JRPetruk

    “Going forward uncertainty” about NAFTA. True enough. But don’t count NAFTA out. Trump is (in his language) negotiating. NAFTA isn’t dead because it’s a good thing for all 3 countries in it. Large swaths of citizens of the 3 treaty countries think they are being screwed. I get that. But if North America doesn’t work together, in time, we will be torn apart. Simple as that. Our leaders must deliver this factual message.

    • Fester N Boyle

      President Trump will not cutoff Mexico, there’s plenty of good in the business deals. You are right, it will all go on, it’s win-win in many ways.

      • nero88888

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        • cooncats

          Did you mistakenly put this silly rant in the wrong section?

  • WestCoastHwy

    The funny thing about these reports and projections is that 89.9% of Mexican Economy is illegal. How in the names of the Gods can you calculate this Domestically (GNP) if even Globally (GDP)? OECD needs to start calculating drugs, crime (e.g. kidnappings), black markets, illegal gambling, and prostitution into the figure so as to not base their calculations only on the 10.1% of the actual legitimate economy.

    I say the 89.9% of the Mexican Economy should see double digit growth in the coming quarter!

  • cooncats

    This truly anemic growth in Mexico just shows how truly bad and corrupt government and the greed and obstructionism of the few hundred rich families that own everything in this country stops what should be one of the most dynamic economies in the western hemisphere. On a demographic basis alone, this country should be growing at 4 percent or better. It is being sabotaged by the political class and the greedy filthy rich.

  • US growth in 2017 will is 2.4 % the same as Mexico. What is affecting the Mexican economy above all else is the price of oil. NAFTA whether there is a renegotiated treaty or not, has set into motion a number of moves by the Mexican government that will adversely effect the US economy, especially in the agricultural sector. Withdrawal from NAFTA will depend on who is elected President in 2018. Several of the top candidates have said they would prefer to withdraw from NAFTA and let the WTO trade rules kick in. No one seems to remember that NAFTA opened the Mexican market to the US and not vice versa. Tariffs on US imports were eliminated in Mexico and the US sells a lot of products in Mexico and the profits remain in the US, whereas Mexican companies, many of them wholly foreign owned sell products in the US and the profits remain in the US. Most of us who were against NAFTA from the beginning feared that Mexico would become a country that rented labor and that is exactly what has happened. Mexico has lost 2 million agricultural jobs which has caused mass movement to the industrial cities and contributed to illegal immigration to the US from Mexico.

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