REYNOSA, Tamaulipas - The Mexican economy is in the midst of a broad-based expansion, according to International Monetary Fund staff.
“Growth is expected to be 3.2 percent in 2023, led by robust private consumption and investment, with notable strength in service sectors, construction, and auto production,” the IMF staff say.
“This has led to record-low unemployment rates and record-high manufacturing capacity utilization rates. The authorities have commendably kept public debt in check. Monetary policy is rightly focused on bringing down inflation.”
The statement by the IMF staff was published on the IMF website on Cot. 3.
“Economic growth is expected to moderate to 2.1 percent in 2024. Although fiscal policy will loosen, amplifying its procyclicality, its growth impact will be limited by binding capacity constraints, a continuation of tight monetary policy, and slowing growth in the U.S.,” the statement says.
“Maintaining the policy rate at current levels until around mid-2024 should allow inflation to return to Banxico’s target by 2025. Risks to the growth outlook are broadly balanced.”
The statement continues: “Stronger-than-expected growth in the U.S. or a larger-than-expected fiscal multiplier could boost growth in Mexico. However, an increase in global risk aversion, a higher path for interest rates in the advanced economies, or delays in implementing key infrastructure projects in Mexico would weigh on output. Risks to inflation are viewed to be modestly skewed to the upside.”
Securing sustainable and inclusive growth in a complex global environment will require a broad set of reforms, the IMF staff write.
“The ongoing reshaping of global supply chains is an important opportunity for Mexico. Notably, Mexico’s proximity to, and deep trade links with, the U.S. make it a key location for the “nearshoring” of production for the U.S. market,” according to the statement from the IMF staff.
“However, capitalizing on this potential and competing with other production locations will require addressing Mexico’s long-standing structural challenges while continuing to pursue prudent macroeconomic policies.
“This will require higher and better-targeted public investment, better governance, increasing access to domestic sources of finance, increasing female labor force participation, and pivoting consumption toward cleaner sources of energy.”
Editor’s Note: Click here to read the full statement from the IMF staff.
