Country Overview: Mexico

The country is one of the most important emerging economies and is renewing its efforts to become a leader in the region – it just became a member of the Pacific Alliance. Mexico has agreed on an ambitious and comprehensive National Development Plan, which also guides the structural reform agenda to enhance productivity.

The Mexican economy recovered from the severe contraction generated by the 2008-2009 global financial crisis as the economy experienced an average annual growth of 4.3 % between 2010 and 2012. More recently, weak external demand has led to stagnation in growth and prompted the Ministry of Finance to lower its growth projection for 2013 to 1.8 %.

Mexico experienced a surge in capital flows and despite significant volatility in financial variables seems to be in a sound position to deal with moderation of flows upon withdrawal of monetary support in the U.S.  A flexible exchange rate, a modest current account deficit, international reserves at US$170 billion and an IMF FCL of US$73 billion should provide significant protection against external shocks.

The adoption of structural reforms in the areas of labor legislation, education, telecommunication and competition policy, financial sector, energy and tax policy is expected to enhance potential output growth, currently estimated around 3 percent, by about a full percentage point through additional investments and eventually through higher levels of productivity that these reforms are expected to unleash.

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