The Mexican economy continued to expand at an annual rate of 2.5 percent through most of 2015 and early 2016, though is expected to weaken in 2016 to about 2 percent following a modest contraction of economic activity in the 2nd quarter. The expansion of economic activity now fully relies on private consumption as weak investment and export demand are no longer contributing to growth. Increased external competitiveness following a substantial depreciation of the Mexican peso with respect to the U.S. dollar has not yet led to a boost in external demand. Strong vertical supply relations between U.S. and Mexican manufacturers cause that recent softness in U.S. industrial production is transferred to Mexican manufacturing industry and exports.

A significant depreciation of the Mexican peso against the US dollar took place over the past two years as a flexible exchange rate is effectively employed as an external shock absorber. The pass-through of currency depreciation to domestic prices has thus far been limited as inflation moved to slightly below the central bank’s target of 3 percent, though the possibility of such pass-through following additional currency depreciation remains a major concern for the monetary authorities that, in response, hiked the monetary policy rate to 4.25 percent.

A persistent trend of increasing debt-to-GDP for almost a decade now (from 29 percent in 2007 to an estimated 50.5 percent by the end of 2016) in combination with falling oil revenue, a fragile financial situation of the National Oil Company PEMEX as well as disappointing economic growth led rating agencies to put Mexico’s sovereign (investment grade) rating on a negative outlook. In managing the decline in oil revenue, the government benefitted from a tax reform implemented in 2014 that substantially raised non-oil revenue and started to cut (non-mandatory) expenditures in 2015 and 2016. An additional tightening of public expenditure in 2017, aimed at achieving a primary surplus for the first time in nearly a decade, should stall the increasing public debt burden.

Monetary and fiscal policy responses to adverse external shocks will weigh down on aggregate demand in the short term. A further decline in the volume of oil production, due to falling output from aging fields and insufficient investments in replacing exploration and exploitation capacity, will continue to trim down annual growth rates by about half a percentage point. Nevertheless, economic and financial stability, further progress in the implementation of an ambitious structural reform agenda, as well as the increase in external competitiveness following the depreciation of the currency is expected to boost private investment and exports lifting economic growth in the medium term.

The Mexican economic continues to face a complex external environment in which persistently low oil prices, a normalization of U.S. monetary policy, a slowdown in global trade and economic growth and a diversity of geopolitical events may heighten risk aversion and financial volatility posing challenges to the country’s economic and financial stability and growth outlook. Policy priorities will remain focused on prudent monetary, financial, and fiscal policies to create the conditions for stronger growth in the medium term.

Last updated: September 26, 2016


The World Bank Board discussed in December 2013 the Country Partnership Strategy (CPS) covering FY14–19—which was jointly prepared with the Government of Mexico. This CPS focuses on the World Bank Group twin goals (ending extreme poverty and promoting shared prosperity) and is fully aligned with Mexico's National Development Plan (NDP) for 2013–18.  It offers integrated WBG packages of financial, knowledge, and convening services in four strategic themes:

·         unleashing productivity;

·         increasing social prosperity;

·         strengthening public finances and government efficiency; and

·         promoting green and inclusive growth.

The World Bank Group (WBG) engagement in Mexico includes a selective and tailored package of instruments integrating financial, knowledge and convening services. The Bank’s financial engagement focuses mainly on social protection and education programs—from early childhood development to upper secondary level; a green and inclusive growth agenda integrated by energy, environment, water, agriculture and transport projects; and financial inclusion programs. The active portfolio as of September, 2016 is comprised of 14 projects (including 4 stand-alone GEF), totaling US$2.2 billion in net commitments. Two IBRD projects were approved by the Board in FY16 totaling US$500 million—the Expanding Rural Finance project (US$400 million) and the Municipal Energy Efficiency project (US$100 million). The Bank has a wide grant portfolio of approximately US$275 million, comprising around 45 active grants supporting activities in the areas of environment and energy. Through a strategically aligned knowledge program, the WBG also provides support to Mexico. Timely inputs have been provided in areas such as climate change, poverty reduction, urban development and health, among others.  

Last updated: September 26, 2016


A few examples of the work of the World Bank in Mexico:

Subnational development. The World Bank is working closely with the Government of Oaxaca, one of the poorest States in Mexico, through a Memorandum of Understanding that includes financial, knowledge and convening services in multiple sectors, tailored to the specific needs of Oaxaca. Recently, the first Program for Results to Mexico was approved (US$55 million) which also happened to be the first sub-national loan to Oaxaca. The Bank has provided analytical and advisory services to encourage a results-based approach in public budgeting,  to promote social inclusion, reduce poverty and improve efficiency in the provision of health, education and social protection services in the state. Knowledge has also been shared with other countries through several South-South Knowledge Exchanges, for example in maternal and new-born approaches (Peru), and water supply and sanitation programs (Brazil).

Education. The World Bank has a broad engagement with Mexico on education and labor market issues, one example being the support of an early education program in rural areas, implemented by the National Council for the Promotion of Education, CONAFE.

Energy Efficiency. The Efficient Lighting and Appliances Project sought to promote Mexico’s efficient use of energy and to mitigate climate change by increasing the use of energy-efficient technologies at the residential level.  By the closing date of the project (FY14), 45.8 million of incandescent bulbs (IBs) had been replaced with compact fluorescent lamps (CFLs), and 5.074 million tons of CO2 emissions were avoided. 

Climate Change. The Coastal Watersheds Conservation Program aims to promote integrated environmental management of selected coastal watersheds as a means to conserve biodiversity, contribute to climate change mitigation, and enhance sustainable land use.  The project currently supports the implementation of 28 Sustainable Forest Management sub-projects in the Gulf of Mexico region and 3 sub-projects in the Gulf of California region.

Read about further results of World Bank projects and initiatives here.



Mexico: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments