Mexico - Economic forecast summary (November 2016)


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Economic activity has been resilient to sharply lower oil prices, weak world trade growth and monetary policy tightening in the United States. Domestic demand remains the main driver of economic activity, supported by recent structural reforms that have cut prices to consumers, notably on electricity and telecoms services. Growth will be held back in 2017 and 2018, mostly through investment and consumer confidence, following uncertainties about future US policy, although the economy could benefit from stronger import demand from the United States.

Macroeconomic policy is being tightened. Banco de Mexico raised policy rates to counter inflationary pressures and keep inflation expectations anchored near the inflation target and more recently in response to heightened uncertainty in the wake of the outcome of the US presidential election. In order to meet the consolidation path and ensure debt sustainability, the 2017 budget includes expenditure cuts, with the objective of returning to a primary surplus.

The government laid down a consolidation path two years ago to reduce the budget deficit (measured by the public sector borrowing requirement) by 2 percentage points of GDP over 4 years. However, there is scope for reallocating expenditures and further limiting tax expenditures to raise spending on programmes conducive to inclusive growth for Mexican families – such as child care, health, poverty reduction, and infrastructure.


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Other information

Economic Survey of Mexico (survey page)




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