Social Spending in Mexico: Needs, Priorities and Reforms

IMF Working Papers, October 18, 2021

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Poverty in Mexico was high before the COVID-19 pandemic and has been exacerbated by the pandemic, with significant variation across states.
Education losses from the pandemic are likely to be large and worsen pre-existing disparities; unless mitigated soon, they could contribute to heightened scarring over the medium term.
Using state-level and cross-country comparisons, the paper reviews key social programs as well as priorities in education and health.
The paper finds that higher spending and improved design of social programs (e.g., better targeting) would:
- reduce socioeconomic gaps,
- mitigate scarring risks, and
- foster inclusive growth.

Poverty dynamics
- Pre-pandemic poverty levels were high and the pandemic has exacerbated poverty.
- There is significant heterogeneity in outcomes across states.
Education
- Pandemic-induced education losses are likely to be large.
- These losses will worsen pre-existing disparities.
- Without prompt mitigation, education losses could contribute to heightened scarring over the medium term.
Health and social programs
- The paper reviews key social programs at state and cross-country levels.
- Policy design aspects such as targeting are highlighted as important for effectiveness.

Increase social spending where warranted to address gaps amplified by the pandemic.
Improve design of social programs, with emphasis on better targeting to reach disadvantaged populations.
Prioritize interventions in education and health to reduce scarring risks and promote inclusive growth.