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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Mexico is among the world's 15 largest economies and is the second largest economy in Latin America. The country is highly dependent on the United States, its largest trading partner and destination of nearly 80% of its exports. According to the IMF, GDP grew by an estimated 6.2% in 2021, mainly due to a significant increase in remittances and a gradual job market improvement which positively impacted household consumption. The country is expected to continue growing in the coming years, albeit at a slower pace, with the IMF forecasting a growth of 4% for 2022 and 2.2% for 2023. With increasing vaccination rates and the improvement of the labour market, household consumption is expected to be a key growth driver.

The country recorded a budget deficit of an estimated 3.3% in 2021, a rate that should remain stable in 2022 and 2023, at 3.2% and 3%, respectively. Spending priorities include social programs, the creation of the National Guard to fight rising crime and new funds to support PEMEX, whose rating was downgraded by Fitch due to uncertainty around its future strategy and financial stress. The sector is of pivotal importance to the Mexican economy, as oil production accounts for one third of the government revenues. The country’s debt-to-GDP ratio decreased to 59.8% in 2021 and is expected to remain stable in the upcoming years, at 60.1% in 2022 and 60.5% in 2023. Inflation has been above target since 2017, and it further increased in 2021, reaching 5.4%, the highest rate since 2018. Domestic factors, such as the recovery in the demand for various services, as well as upward pressures on food and energy prices fuelled inflation in 2021. However, inflation is expected to decrease to 3.8% in 2022 and 3% in 2023, boosting purchasing power and private consumption. Overall, Mexico's economic recovery plan in response to the COVID-19 crisis has been efficient, and the country's economy has been gradually rebounding. However, further fiscal support is needed in to ease the strains of the pandemic in the short term.

The labour market is gradually recovering after the initial impact of the pandemic. Mexico's unemployment rate slightly decreased to 4.1% in 2021 and it is expected to reach 3.7% in 2022 and remain stable in 2023. However, the informal sector is still estimated to involve around 60% of employment (OCSE). Key challenges which remain to be tackled include high dependence on the U.S. economy, high and rising criminality rates, income inequality, weakening infrastructure and education, and decades of underinvestment in the oil sector.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 1,269.431,073.92e1,285.521,371.641,446.78
GDP (Constant Prices, Annual % Change) -0.2-8.35.32.82.7
GDP per Capita (USD) 10,0298,404e9,96710,54111,025
General Government Balance (in % of GDP) -2.1-2.8-3.3-3.2-3.0
General Government Gross Debt (in % of GDP) 53.361.0e59.860.160.5
Inflation Rate (%) 3.63.4e5.43.83.0
Unemployment Rate (% of the Labour Force) 3.54.44.13.73.7
Current Account (billions USD) -3.9526.120.45-3.51-6.42
Current Account (in % of GDP) -0.32.40.0-0.3-0.4

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

Mexico's economy is diversified, including hi-tech industries, oil production, mineral exploitation, and manufacturing. According to the latest data from the World Bank, agriculture accounted for 3.8% of Mexico’s GDP in 2020 and employed 12.4% of the country’s active population in 2019. Mexico is the world's seventh agricultural power and ranks among the world's largest producers of coffee, sugar, corn, oranges, avocados and limes. Cattle farming and fishing are also important activities in the food industry. Mexico is also the world's forth largest producer of beer and its largest exporter. Although the agricultural sector suffers from occasional draughts and other issues related to climate, agriculture grew in 2021, mainly driven by the increase in food exports to the USA.

Industry employs 25.5% of the workforce and represents 29.6% of GDP, according to the World Bank. In 2021, employment in manufacturing recovered to above its pre-pandemic levels, as the sector greatly benefited from stronger U.S. activity, which favours the Mexican manufacturing industry. Mexico is among the world's leading producers of many minerals, including silver, fluorite, zinc and mercury. Moreover, oil and gas reserves are one of the country’s most precious possessions. The aerospace sector has grown sharply, thanks to the development of a cluster in Queretaro and the presence of nearly 190 companies, including Bombardier, Goodrich, the Safran group and Honeywell, which together employ 30,000 people. Mexico is also one of the world's ten largest car producers and due to significant real estate investments, the construction sector is dynamic.

The service sector constitutes 60.1% of GDP and employs 61.9% of the workforce. The hi-tech, information and software development sectors are experiencing a real momentum, driven by the quality of the workforce, clusters and low operating costs that favours the creation of call centres. Medical services and tourism have been growing steadily for the past few years, mainly due to lower service costs than in other Western countries. Although the services sector was hit the hardest during the pandemic, it showed a significant recovery in 2021. However, even though a steady recovery was seen throughout the sector, key industries, such as leisure and hospitality, lagged behind and have yet to reach a full recovery.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 12.5 25.5 62.0
Value Added (in % of GDP) 3.9 29.6 60.0
Value Added (Annual % Change) 1.9 -10.0 -7.7

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Mexican Peso (MXN) - Average Annual Exchange Rate For 1 USD 18.6618.9319.2419.3021.49

Source: World Bank - Latest available data.

 

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Foreign Trade

Mexico is highly dependent on foreign trade, which represented 78% of its GDP in 2020 (World Bank, latest available data). The country mainly exports cars (11.1%), computers (6.7%), vehicle parts (6.5%), delivery trucks (5.5%), and crude petroleum (5.5%). As for imports, Mexico’s main purchases include integrated circuits (6.8%), refined petroleum (6.7%), vehicle parts (6.3%), office machine parts (3.8%), and cars (2.2%). According to IMF Foreign Trade Forecasts, the volume of exports of goods and services increased by 7.7% in 2021 and is expected to reach 5.6% in 2022, while the volume of imports of goods and services increased by 17.3% in 2021 and is expected to increase by 7.3% in 2022.

Mexico is heavily dependent on the commercial relations with its main trading partner – the United States – which account for more than three-quarters of the country’s exports. Other destinations for Mexican exports include the EU (6.7%) and Canada (4.4%). As per imports, the main origins include the US (54.4%), China (14.4%), the EU (11.3%) and Japan (2.9%). Mexico has signed a dozen free-trade agreements with about forty different countries of the world. Other trade advantages of Mexico include the United States–Mexico–Canada Agreement (which replaced NAFTA in 2020), its free-trade agreement with the European Union since 2000, a trade agreement with Japan since 2005 and the 2012 foundation of the Pacific Alliance along with Colombia, Chile and Peru.

Although Mexico's trade balance is structurally negative, the country has been seeing a trade surplus in recent years. In 2020, exports of goods and services decreased by 7.3%, reaching USD 434.4 billion; while imports decreased by 14.8%, reaching USD 418.2 billion - taking trade balance to a surplus of USD 34.4 billion. That was largely due to the continued strength of the automotive industry - both motor vehicles and motor vehicle parts - and the impact on U.S.- China trade war, which increased Mexican exports to the United States.

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 397,516432,179476,546467,342393,248
Exports of Goods (million USD) 373,930409,433450,713460,704417,670
Imports of Services (million USD) 31,92636,77537,43537,01825,043
Exports of Services (million USD) 24,09727,01228,57931,33616,803

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 76.177.180.677.978.0
Trade Balance (million USD) -13,070-10,984-13,7675,21434,445
Trade Balance (Including Service) (million USD) -22,031-20,743-24,956-3,05924,274
Imports of Goods and Services (Annual % Change) 2.96.46.4-0.7-14.8
Exports of Goods and Services (Annual % Change) 3.64.26.01.5-7.3
Imports of Goods and Services (in % of GDP) 39.039.541.339.137.9
Exports of Goods and Services (in % of GDP) 37.037.739.338.840.1

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 7.85.72.01.71.7
Volume of imports of goods and services (Annual % change) 17.37.32.22.02.0

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Mexico is a member of the following international economic organisations: IMF, North American Free Trade Agreement (NAFTA), OECD, Asia-Pacific Economic Cooperation (APEC), ICC, G-3, G-15, G-20, G-24, WTO, among others. For the full list of economic and other international organisations in which participates Mexico click here. International organisation membership of Mexico is also outlined here.
Free Trade Agreements
The complete and up-to-date list of Free Trade Agreements signed by Mexico can be consulted here.
 
 

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Political Outline

Current Political Leaders
President: Andrés Manuel López Obrador (since 1 December 2018) - MORENA
There is no de facto vice president in Mexico. In case the President is unable to perform his duties, Congress names a Substitute or Interim President. Until the nomination, the Secretary of the Interior is the one who assumes executive powers provisionally.
Next Election Dates
Presidential: July 2024
Senate: July 2024
Chamber of Deputies: July 2024
Current Political Context
President Andrés Manuel López Obrador broke a two-party hegemony that had lasted for decades when he took office in December 2018, capitalising on social discontent. López Obrador’s government declared economic reforms as its priority, including reforms of the legislation in the energy, financial, fiscal, and telecommunications sectors; along with an overall objective of a more equitable income distribution. More recently, however, the Mexican president has been criticised for not implementing a stimulus programme large enough to jump-start economic recovery and growth following the COVID-19 pandemic. Moreover, in June 2021, the country held midterm elections, where the ruling Morena party and its allies failed to achieve the required two-thirds majority in the Lower House to pass constitutional changes. Nevertheless, a simple majority allows the government to keep control of issues such as the budgetary process. Still, the election results strengthened Morena's coalition ahead of the 2024 presidential election, as the party won 11 out of the 15 governorships that were at stake. Also in 2021, President Obrador announced his plans to send a constitutional amendment to Congress to the workings of the energy sector. The bill aims to modify the constitutional scheme for the generation and commercialisation of electrical energy, and if it passes in Congress, it'll place the country in a position contrary to the global trends that aim for greener energy alternatives, which could negatively affect business confidence in Mexico.
Main Political Parties
Mexico has a multi-party system. Under the transition to democratic pluralism, the centre of political power has shifted away from the executive and towards the legislative branch and local governments. The largest political parties in the country are:

- National Action Party (PAN): centre-right to right wing, liberal conservative, Christian democratic party.
- Institutional Revolutionary Party (PRI): centre to centre-left, oldest political party in the country, constitutionalist, technocratic, social conservative, big tent party.
- Ecologist Green Party of Mexico (PVE): centre-right, environmentalist, conservative.
- Labour Party (PT): left-wing, social democratic, labourist, left-wing nationalist.
- Citizens' Movement (MC): centre-left, social democratic, progressist.
- Party of the Democratic Revolution (PRD): centre-left to left wing, social democratic party.

Executive Power
As established by the Constitution, the Executive power is headed by the President of the United Mexican States. The President is both Head of State and of Government, as well as the Supreme Commander of the Armed Forces. He or she is elected by popular vote for a six year term and cannot be reelected. The President appoints the Cabinet.
Legislative Power
The Mexican legislative power is in the hands of the Congress of the Union, which is divided in two chambers: the Chamber of Deputies and the Senate of the Republic. The Chamber of Deputies has 500 members, 300 of which are elected through plurality voting and 200 through proportional representation, with a three-year mandate. The Senate of the Republic is composed by 128 members, 96 of which are elected through plurality voting and 32 through proportional representation, all with a six-year mandate.
 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Mexico, please visit the Mexican government platform with the official data. Official information on the progress of the epidemic in Mexico is consolidated by the Secretary of Health, which provides a daily epidemiological update and includes key national figures.
For the international outlook you can consult the latest worldwide data in the daily situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest public health situation in Mexico and the current sanitary measures in vigour, please consult the Mexican government platform COVID-19 Mexico including the up-to-date information on the containment measures put in place and public health recommendations. The full list of the COVID-19 related websites of the different States of Mexico is available here.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the Mexican government platform dedicated to Covid response. Further details can be sought on the portal of the Mexican Custom Authorities.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Mexico on the International Trade Centre's COVID-19 Temporary Trade Measures webpage, and the website of World Customs Organisation.
Economic recovery plan
For the information on the economic recovery scheme put in place by the national government to address the impact of the COVID-19 pandemic on the Mexican economy, please visit the portal of the Mexican government. Further details in English are available on the dedicated page on KPMG's website.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Mexican government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Mexico in the IMF’s Policy Tracker platform.
Support plan for businesses
For the information on the local business support scheme established by the Mexican government to help small and medium-sized companies to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the dedicated pages on the official portal Mexican government platform (in Spanish).
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
Support plan for exporters
For the up-to-date information on possible support plans for exporters in Mexico, if applicable, please consult the Mexican government platform, as well as the website of the Secretariat of Economy.
 

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