Mexico Overview

  • The Mexican economy performed better than expected during the first half of 2017 with annual Gross Domestic Product (GDP) growth at 2.3 percent. Conditions on financial markets have also improved as the peso appreciated with respect to the U.S. dollar, following a significant depreciation earlier this year. Resilience to shocks, sensible monetary and fiscal policy responses, as well as a gradual improvement in the country’s external environment managed to restore confidence and strengthen economic activity.

    A strong recovery of external trade created a vigorous contribution of net exports to GDP growth. Increased external competitiveness derived from the accumulated currency depreciation over the past three years and strengthened U.S. industrial production have been invigorating Mexican exports. Private consumption continues to expand at a steady pace even though increasing inflation is dampening consumers’ purchasing power by limiting real labor income growth. Total investment is flat for the second year in a row, dragged by a fall of public investment.

    Annual consumer price inflation peaked in August at 6.7 percent following the impact of domestic fuel price hikes at the beginning of the year and some pass-through from accumulated currency depreciation. In response, the Central Bank hiked its monetary policy rate by 125 basis points during the first half of 2017 leaving the overnight interest rate at 7.0 percent by the end of June. Inflation is expected to come down next year to the upper side of the interval of plus minus 1 percent around the Central Bank’s medium-term target of 3 percent.

    The government remains committed to its medium term fiscal consolidation program that should keep the overall deficit in the medium term at 2.5 percent of GDP and place public debt on a downward path. An improved fiscal stance contributed to a revision of the outlook on Mexico’s sovereign credit rating to stable from negative by two of the main credit rating agencies. Reconstruction after the devastation caused by two major earthquakes in September 2017 in the central and southern parts of the country will be mainly funded with resources from reserve funds and insurance that make up the government’s natural disaster risk management strategy as well as some budgetary reallocations.

    A contentious and prolonged renegotiation of North American Free Trade Agreement (NAFTA) that could delay negotiations beyond early 2018 would increase uncertainty about the future of the trade agreement. This could complicate the process due to the proximity of the presidential elections in Mexico (July 2018) and U.S. mid-terms (November 2018). It would also raise the risk of terminating the agreement with a disruptive impact on trade, investment and financial relations. 

    Last updated: October 10, 2017

  • 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 current active portfolio as of September 2017, is comprised of 16 projects (including 3 stand-alone Global Environmental Fund, GEF), totaling US$ 2.43 billion in net commitments. Three IBRD projects have been approved by the Board in FY17 totaling US$ 350 million — the Higher Education project (US$ 130 million), the Agriculture Services for Food Security and Competitiveness project (US$ 120 million) and the Access to Affordable Housing project (US$ 100 million).

    The Bank has a wide grant portfolio of approximately US$ 279 million that comprises 39 active grants supporting mainly activities in the areas of environment and energy. This portfolio includes, among others, a large Clean Technology Fund implemented in conjunction with the national Urban Transport Program project, a Forest Investment Program (FIP) fund and a recently approved Recipient Executed Trust Fund in strengthening capacity for forestry dependent people – Mexico Dedicated Grant Mechanism for Indigenous People and Local Communities (US$ 6 million). Through a strategically aligned knowledge program, the WBG also provides support to Mexico. Timely inputs have been provided in areas such as climate change, urban development, water and transport, among others.

    Last updated: October 10, 2017

     

  • 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.

     

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LENDING

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

*Amounts include IBRD and IDA commitments


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Additional Resources

Country Office Contacts

MEXICO +5255 5480-4200 (Visits by appointment)
Insurgentes Sur No. 1605, Piso 24 Col. San José Insurgentes, México 03900, D. F.
cmolinahernandez@worldbank.org
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433
cmolinahernandez@worldbank.org