Mexico projection note OECD Economic Outlook November 2023

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Mexico The economy is projected to expand by 2.5% in 2024 and by 2% in 2025, after growing by 3.4% in 2023. Consumption will be supported by a strong labour market. Investment will be backed by public infrastructure projects which are expected to be finalised in 2024 and by the nearshoring of manufacturing activities to Mexico. Export dynamism will be mitigated by milder growth in the United States. Inflation will edge down to 3.9% in 2024 and 3.2% in 2025. Monetary policy should remain restrictive to ensure that inflation decreases durably towards its target. Targeting social spending increases on low-income households and basing public investment projects on sound cost-benefit analysis would boost public spending efficiency and mitigate inflationary risks. Higher regulatory certainty, including in the energy sector, would help to make the most of the ongoing nearshoring of production processes to Mexico. Domestic demand is resilient Short-term indicators show consumption remaining resilient and investment trending up, particularly in non-residential construction, supported by public infrastructure projects in the south, and investment in machinery and equipment related to nearshoring. Mexican industrial parks across the United States border are at full capacity. Export growth and manufacturing production have remained solid, particularly in the automotive sector. Headline inflation has continued to decline, reaching 4.3% year-on-year in October, while core inflation remains stickier, at 5.5%. Inflationary pressures remain particularly high in services.

Mexico

1. The shaded area represents the central bank's inflation target range. 2. Private sector inflation expectations for the next 12 months. Source: INEGI; and Bank of Mexico. StatLink 2 https://stat.link/cs49hr

OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023


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