With a population of almost 130 million, a rich cultural history and diversity, and abundant natural resources, Mexico has the 11th largest economy in the world. The country has strong macroeconomic institutions and it is open to trade and private investment. The authorities have implemented stable and sustainable monetary and fiscal policies, which have made the Mexican peso the most highly traded emerging market currency. Currently, it is the world’s 15th largest exporter due to the strengthening of its productive capacities, diversifying away from raw materials such as oil, and deepening its production complexity on manufactured products that are integrated into regional and global value chains.
However, despite all this progress, over the last three decades Mexico has underperformed in terms of growth, inclusion and poverty reduction compared to similar countries. Its economic growth averaged just above 2 percent a year between 1980 and 2018, limiting progress in convergence relative to high income economies. On a per capita basis, average growth was close to just 1.0 percent. The country’s per capita GDP today stands at 34.0 percent of U.S. per capita GDP, compared with 49.0 percent in 1980. In this context, progress towards poverty reduction has been moderate. The total share of the population living below the monetary poverty line in 2018 was 48.8 percent, close to the level observed in 2008. The median per capita income (MePCI) has recently recovered slightly after several years of decline. After a decline between 2010 and 2014, the annualized growth rate of MePCI in Mexico was 1.8 percent between 2016 and 2018, still well below the average for the LAC region.
Low growth rates and significant inequalities continued to raise the question of how Mexico can grow more rapidly and become more inclusive? These are the central issues covered in the recent Mexico Systematic Country Diagnostic (SCD).
But Mexico is a country with significant opportunities and potential. Its macroeconomic stability is the cornerstone to foster investments and a growing private sector. Improvements in productivity growth, stronger institutions, and quality of service delivery and infrastructure, coupled with attention to reducing regional and household income inequalities, would bring shared prosperity. Its trade agreements, enviable geographic position, and growing domestic market, make Mexico a prime destination for investment.
Last Updated: Apr 13, 2020