Mexico's Outlook in 5 Charts
IMF News, November 20, 2017
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- Published: November 20, 2017
Overview
- The Mexican economy keeps growing, mainly thanks to its strong economic policies, even as the fate of the country’s trade deal with North America remains unclear.
- Mexico would still benefit from carrying out reforms for stronger and more inclusive growth.
- Main areas to tackle: inequality, corruption, obstacles holding back firms’ productivity, and tax collection to allow more room for public investment.
Near-term growth outlook
- The IMF has revised down slightly the near-term growth forecast for the Mexican economy compared to the 2016 projections.
- Mexico’s growth outlook: 2.1 percent for 2017 and 1.9 percent for 2018.
- Revision reflects uncertainty related to the renegotiation of the North American Free Trade Agreement (NAFTA).
Tax collection and public investment
- Mexico stands out among its peers in Latin America and the Organization for Economic Co-operation and Development (OECD) with its low share of tax revenues.
- Low tax collection constrains public spending and has led to neglected public infrastructure.
- Policy priorities:
- Improve tax collection.
- Close tax avoidance loopholes.
- Make public spending more efficient.
- Expected outcome: more room to invest in public infrastructure.
Poverty and inequality
- Poverty affects more than 40 percent of Mexico’s population.
- Inequality, measured by the Gini coefficient, remains close to 0.5 (a Gini of 0 represents perfect equality), versus 0.3 on average in OECD member countries.
Rule of law and corruption
- Strengthening the rule of law and fighting corruption should be a priority for Mexico.
- Combating corruption would increase productivity by:
- Fostering investment in the most productive firms.
- Reducing rent-seeking behavior.
- Recommendation: Swift implementation of all elements of national and state level anti-corruption plans to help lift potential growth.
Informality and access to services
- Informality is high, and access to services such as electricity and financial products remains uneven.
- Policy recommendation: Doubling down on the Pacto por Mexico (a reform agreement endorsed by the major Mexican political parties in 2012) would especially benefit southern states and help boost productivity.
Source: Mexico's Outlook in 5 Charts, IMF News, November 20, 2017.