Productivity and long term growth

Going for Growth 2018 - Mexico note

 

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Going for Growth is the OECD flagship report analysing structural policy settings and economic performance to provide policymakers with concrete reform recommendations to boost growth and ensure that the gains are shared by all. The 2018 Interim Report reviews the main growth challenges and takes stock of reforms enacted over the past year -- in both advanced and emerging economies -- on policy priorities identified in the previous issue of Going for Growth.

Country highlights

The wide gap in GDP per capita relative to the most advanced OECD countries is persistent and is primarily driven by the low level and growth rate of labour productivity, which is now showing signs of a pick-up following the recent reforms. Inequality remains among the highest in OECD countries, due in particular to the high prevalence of poverty.

To tackle weak productivity, it is essential to boost the capacity of the economy to adopt and adapt foreign knowledge and technology so as to increase benefits from trade and participation in global value chains. Raising educational achievement, further reducing barriers to FDI and start-ups and strengthening innovation policies are key priorities. Full implementation of the reform package is essential, and renewed efforts to fight corruption and informality will help to make growth more inclusive.

Going for Growth 2017 recommendations include:

  • Raise educational achievement by refocusing spending on pre-primary, primary and secondary education. Increase professionalisation of the education system, through teacher training programmes and merit-based organisational schemes, as a way to improve the quality of education. 
  • Improve the rule of law by enacting and implementing a second wave of legal reform to civil and commercial justice. Pursue the transition from written to oral trials to improve the outcomes of economic disputes, such as those related to contract enforcement. Complete the setup of anti-corruption systems at the state level, in particular to improve the consistency with which regulations are applied. 
  • Reduce barriers to foreign direct investment by continuing to lift FDI restrictions in key sectors, such as transport and banking. Improve the business climate to attract FDI in services, in part by enhancing the transparency of regulatory policies. 
  • Reduce barriers to entry and competition by facilitating and supporting firm entry. Ease entry regulations in professional services and licensing requirements in retail trade to foster formal employment. 
  • Strengthen innovation policies by promoting early-stage financing and industry co-operation with research institutes by strengthening industry networks, particularly through facilitation of clusters. Create public programmes promoting innovation in local firms and linkages with foreign affiliates. 

Recent policy actions in these areas include:

  • The implementation of the mandated National Evaluation System of teachers has been finalised, where almost all of the teaching body has been evaluated, and public investment has been undertaken to improve schools' infrastructure.
  • A new tax credit regime for R&D has been introduced, making 30% of an increase in R&D expenses and investments (with respect to past values) deductible from taxes.

Mexico: Latest Economic Forecast 

Mexico: Latest Economic Survey

 

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