The Mexican Economy
The economy in Mexico is among the largest in the world with the IMF ranking it at number 15. According to the IMF, Mexico’s GDP (purchasing power parity) is the second largest in Latin America and 11th largest in the world.
Since the North American Free Trade Agreement (NAFTA) took effect in 1994, Mexico has increased their manufacturing capabilities substantially to become a key supplier for the U.S. market. A large majority (90%) of Mexico’s trade falls under their numerous free trade agreements.
The Mexican economy bounced back strongly after the 2009 financial crisis. The economy fell back to its pre-crisis average through much of the 2010s. At the end of the decade it started to fall away.
By the end of 2018 the economic growth rate had fallen to 2.1%. In 2019 it fell further, to -0.1%. The impact of COVID-19 means forecasts for 2020 are for -6.6%. However the future looks brighter and models predict 2021 will see an uptick to 3% growth.
2020 was difficult for economies globally but Mexico has the natural resources to recover. A lot will depend on how well they can harness worker productivity. Mexico has traditionally performed poorly here.
In the last decade, the Mexican government made major reform in the communication, education, energy, and financial sectors, with a goal to increase Mexico’s overall economic competitiveness.
Financial Disparity Within Mexico
The Mexican economy clearly shows disparity between different regions and social groups.
The income inequality in Mexico is perfectly shown by the looking at Carlos Slim. The communications mogul is said to have a net worth of over 5% of national GDP.
According to the Organization for Economic Co-operation and Development, Mexico has the second highest level of economic disparity in the world, surpassed only by Chile.
This disparity is declining, as social and education programs are becoming more widely available.
Disparity can be clearly seen by comparing different regions. The northern regions account for a much higher level of development and economic growth than those in the south.
What Is The Outlook For The Mexican Economy?
Going forward, Mexico should recover well and then next decade holds promise. Mexico’s macroeconomic success continues to attract private investors.
The unemployment rate is expected to rise in 2020, to above 5%. After that a drop back to somewhere in the 3.5% range is forecast. The Mexican economy is closely linked with that of the United States. A strong U.S. economy would be good news for Mexico in the coming years.
Exports are expected to increase, but with the United States buying less from Mexico, the need to find other trading partners is pressing.
Mexico Economic Statistics
Real annual growth rate (2019): -0.1%
Per capita income: US$9,997 (2019)
Avg. inflation rate: 3.64%
Natural resources: Petroleum, timber, gold, silver, copper, iron, zinc
Primary sectors (62.4% of GDP): Hotels and restaurants, tourism, financial, trade, and transport and communication.
Secondary sectors (34.2% of GDP): Manufacturing, electricity and water supply, and construction.
Tertiary sectors (3.5% of GDP): Agriculture, forestry, fishing, farming, and mining.
Exports: US$430.9 billion: coffee, cotton, fruits, vegetables, manufactured goods, oil and oil products, silver
Major trade markets: U.S. (80.3%), Canada (2.7%), China (1.5%)
Imports: US$434.8 billion: agricultural machinery, aircraft, aircraft parts, automobile parts (repair, assembly), electrical equipment, metalworking machines, and steel mill products.
Major suppliers: U.S. (49.1%), China (16.6%), Japan (4.4%), Germany (3.5%)
Labor force: 57.1 million
Unemployment rate (2019): 3.38%