Mexico faces new challenges, OECD says

The Organisation for Economic Co-operation and Development (OECD) has maintained its 2.5% growth forecast for Mexico in 2018 , though it stated that there are still many challenges involving high levels of violence, corruption, poverty, informality, and low productivity.

The projection remained unchanged regarding the month of March , which showed an improvement on the 2.2% growth predicted in November 2017.

In addition, the expansion forecast for Mexico’s GDP is below average in regard to global economy, which shows a 3.8% growth , as well as to the 2.6% average growth rate of the countries participating in the OECD . It is also lower than the United States’ 2.9% forecast.

To the OECD, the uncertainty brought upon by the renegotiation of the North American Free Trade Agreement (NAFTA) will continue as foreign investment in Mexico and Canada is expected to drop . Unless the negotiations prove favorable, project development is likely to accelerate.

“Once the uncertainty surrounding the renegotiation of NAFTA has dissipated, we may expect an increase in investment,” stated the OECD in their report this morning.

Regarding Mexican economy , the institution explained that, although a recovery is underway , boosted by private consumption and exports , there will continue to be uncertainty due to the lending restraint in the private sector, although private investments are expected for reconstruction in the states affected by the earthquake of September 19, 2017.

In the meantime, public investment will remain low , unemployment rates will be at an all-time low, and inflation levels will continue to drop . Because of this, the OECD estimates that Mexican economy will grow at a rate of 2.8% in 2019 , whereas the world economic growth will be of 3.9% , and the average growth rate of the OECD will be of 2.5%.

The institution said that the effects of the structural reforms are already visible, but certain challenges remain because of the high levels of violence and corruption in Mexico, as well as poverty, inequality, informality, and low productivity.

In order to fully reap the benefits of the structural reforms, these must be efficiently implemented and reinforced by another round of reforms, stated the OECD.

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