Mexico: Flu and auto troubles fuel downturn

Mexico entered recession in late 2008, and growth had turned highly negative by the first quarter of 2009, as both exports and domestic demand contracted in the wake of the crisis. The outbreak of influenza and continued troubles for auto manufacturers are likely to have contributed further to the downturn.

Growth is set to pick up during the second half of 2009 and accelerate further through 2010, reaching quarterly growth rates of above 4% in annualised terms. Inflation has remained relatively high, despite the sharp drop in demand, largely due to sticky administered prices. This persistence in inflation has limited the scope for monetary easing.

The fiscal response to the crisis has been welcome, although it could have been better targeted. While the room for further stimulus is limited, Mexico should not rush into fiscal consolidation and aggravate the recession needlessly. To avoid adverse market reactions to breaking the balanced budget rule, a clear medium-term fiscal strategy should be formulated and communicated. To help boost activity, the central bank should use the room it has for cutting policy rates further, while keeping an eye on the exchange rate and possible exchange-rate pass-through into consumer prices.

Click here to see all OECD Observer articles on Mexico

See also www.oecd.org/mexico

You can order the latest Economic outlook at www.oecd.org/bookshop

©OECD Observer No 274, July 2009




Economic data

GDP growth: +0.6% Q1 2019 year-on-year
Consumer price inflation: 2.3% May 2019 annual
Trade: +0.4% exp, -1.2% imp, Q1 2019
Unemployment: 5.2% July 2019
Last update: 9 September 2019

OECD Observer Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Subscribe now

<b>Subscribe now!</b>

Have the OECD Observer delivered
to your door



Edition Q2 2019

Previous editions

Don't miss

Most Popular Articles

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2019