Mexico flag Mexico: Economic and Political Overview

The economic context of Mexico

Economic Indicators

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 (%) 3.63.4e5.76.83.9
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

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. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

Find more information about your business sector on our service Market reports (keyword).

 
 

Find out all the exchange rates daily on our service International currency converter.

 

Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
65,5/100
World Rank:
65
Regional Rank:
11

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
6.36/10
World Rank:
43/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

See the country risk analysis provided by Coface.
 

Return to top

 

Return to top

Any Comment About This Content? Report It to Us.

 

© Export Entreprises SA, All Rights Reserved.
Latest Update: June 2022

Return to top