Mexico: Growth to accelerate
After a moderate slowdown in 2007, reflecting a weakening of external demand, GDP growth is expected to accelerate in the course of 2008 and reach 4.25% in 2009. The approval of the fiscal reform should boost business confidence, underpinning stronger domestic and foreign investment.
Inflation, affected by the increases in international oil and food prices, may rise to above 4% during 2008, easing down thereafter, and approaching the inflation target by the end of 2009. The current account deficit is expected to widen gradually. With inflation at the top of the variability interval around the target, the central bank tightened the monetary stance, taking action to raise interest rates in October; this was appropriate. The recent tax reform is expected to bring additional revenue, reducing the reliance of the budget on uncertain oil revenue and helping to finance higher public spending in key areas such as infrastructure, healthcare and education. A strong commitment to increase spending efficiency would contribute to improve growth prospects over the longer term.
No. 264/265, December 2007-January 2008
• OECD Economic Outlook No. 82, December 2007
• Visit www.oecd.org/mexico
• All OECD Observer articles on Mexico