The Mexican economy continues to expand at a moderate annual rate of growth of 2.4 percent as the economic recovery lost steam during the first half of 2015. Moderate growth during the first semester of 2015 in Mexico has been attributed to weakness in industrial production in the U.S., a further drop in the volume of oil production reducing annual GDP growth by about 0.4 percentage points and financial market volatility. A gradual recovery of economic activity is expected to continue, with economic growth strengthening from 2.3 percent in 2015 to 3.0 percent in 2017. The expansion of economic activity will rely on growth of private consumption and investment, with an increase in manufacturing exports following the significant real exchange rate adjustment and robust growth in the U.S. eventually providing additional support.

Public sector revenue showed a strong performance mainly due to a sharp increase in income taxes, reflecting the deferred impact of the revenue-enhancing tax reform enacted at the end of 2013. Higher income and fuel excise taxes compensated lower public sector oil revenue due to declining oil production and sharply lower oil prices. Anticipating longer-lasting low oil prices, the government is reducing public sector expenditures over a two-year period (2015-2016). Despite higher income and excise tax revenue and in order to maintain fiscal consolidation plans, the government decided to respond to lower oil revenue by reducing public sector spending in 2015 and 2016, by 0.7 percent of GDP in each year. A strong commitment to sound public finances is at the core of the government’s policy response to the challenges posed by an increasingly complicated external environment, despite the possible dampening impact on the pace of economic growth.

A substantial depreciation of the Mexican peso vis-à-vis the U.S. dollar over the past year has raised price and financial stability concerns related to tighter external financial conditions and a possible overshooting of the nominal exchange rate. The policy response to adverse shocks that led to the currency depreciation aims to maintain solid macroeconomic fundamentals and achieve orderly adjustments on financial markets. In this regard, the authorities already engaged in moderate currency market interventions to smooth exchange rate movements and announced plans for fiscal consolidation as well as a monetary policy that will take into account its relative stance vis-à-vis the United States. Pass-through of currency depreciation to domestic prices has thus far been limited as overall consumer price inflation is moving slightly below the medium term target of 3 percent.

A complicated global environment will continue to weigh on Mexico’s economic growth prospects.. The Mexican authorities have already signaled their commitment to appropriate fiscal and monetary policy tightening aimed at maintaining macroeconomic stability.

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.

Mexico is IBRD’s second largest borrower per outstanding debt with US$14.6 billion as of end of August 2015. The Bank’s financial engagement (loans, Global Environment Facility, Clean Technology Fund) focuses mainly on education programs—from early childhood development to upper secondary level— and a green and inclusive growth agenda integrated by energy, environment, water, agriculture and transport projects. The active portfolio is composed of 20 projects (incl. 7 stand-alone GEF), totaling US$2.38 billion in net commitments with an undisbursed balance of US$1.55 billion. During FY15 the total lending volume approved was IBRD US$850 million and GEF US$16.9 million.

The Bank also supports Mexico through a wide grant portfolio of approximately $288 million (GEFs not included), comprising 45 active grants mainly focusing on environmental and energy issues.

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

Disaster risk management. The Bank has been engaged with the Government of Mexico for several years in this area, and is supporting Mexico’s move towards a comprehensive strategy of preventing and managing disasters.

This strategy focuses on:

  • Risk identification,
  • Risk prevention and management,
  • Risk financing, and
  • Post-disaster reconstruction.

Climate Change. For more than a decade, Mexico has worked to develop policies to mitigate and adapt to climate change. The financial, knowledge, and convening services facilitated by the Bank have contributed to increasing the areas under environmental management by 20 percent, to improving air quality in Mexico City, and to increasing water availability.

Subnational development. The World Bank is also 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.

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