The Economy of Mexico and Its Prediction for the Future

Mexico is fast becoming what is known as a heavy-weight in emergent markets. Last year 2017, its GDP or “gross domestic product” was $2.4 trillion. This was less than its major trading partner United States who had a GDP of $17.9 trillion. But still it was greater than the other “North American Free Trade Agreement” partner, Canada. Canada had a GDP of $1.6 trillion. The geographic size of Mexico is equivalent to Saudi Arabia, yet it supports 5 times as many people while exporting ¼ of the oil.

GDP growth rate

In Mexico 2017 the growth rate of is GDP was 2.1% which is almost that of the United States, but less than Canada’s growth of 3.0%. This growth for Mexico was slow since 2016, with its growth of 2.3%. Its “standard of living” measure by GDP per person was $19,500. That was less than half of Mexico’s other NAFTA partners.

Depends on exports

Mexico is quickly becoming one of the key exporters worldwide, currently in the rank of number 13. The US received during 2017 81% of Mexico’s exports. Trading with Canada and the United States has tripled after the signing of NAFTA in 1994. Over 90% of Mexico’s trade is the result of 12 free trade agreements. Mexico also has agreements with 44 other countries, and this is more than any other country. These agreements are the largest cause for the success of Mexico.

8th in oil

Mexico is currently the world’s 8th largest oil producer, at close to 3 million barrels each day. This is far less than Canada, Iran or Iraq but still more than other large exporters such as Nigeria, Brazil, or Kuwait. Mexico also imports machinery for agriculture and working with metalworking. It imports automobile and aircraft parts, steel mill products and electrical equipment

2018 and 2019

The Mexican economy is continuing to grow. After reaching 2.4% in 2017, the Mexican economy will continue to grow at rates above 2% in through 2019. Although this is a pace that is impressive, given the external restrictions, it still falls somewhat short of what the country of Mexico needs to make an important cut in poverty and to generate the jobs that young people are demanding.

Outlook

The outlook for the Mexican economy in 2018, points to several positive or encouraging signals. Here are some of the signs that are considered especially important:

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  • Fiscal performance is improving

The procedure of fiscal alliance is on track, restraining the growth of debt and keeping the costs of financing low. Tax reform has increased the revenues from non-oil. These noteworthy changes are welcome made to the “Fiscal Responsibility Act”, although officials need to be careful how to apply the “exceptional circumstances” clause.

  • Monetary policy remains independent, responsible and reliable

Though inflation has surpassed its forecast range, the Bank of Mexico has taken fitting decisions to diminish the “inflationary index” over the year of 2018, increasing interest rates from 3% during 2015 to about 7% at the end of 2017. These rates of interest rates should continue into 2018 to provide stability of prices, but it is at that point that financial policies will be relaxed and return to growth that is supported.

  • Exports are growing

Value of Mexico’s exports of total goods rose close to 10% between January and October 2017, and exports that are manufactured were up by close to 9%, in a year where world product trade grew by only 3.6%. It is necessary to understand that were exports made by multinational companies well-established in Mexico. This makes the continuing challenge to connect Mexican SMEs into these flows. The portion of Mexican SMEs in the chain of global value is still rather low.

  • Foreign direct investing is also growing  

Mexico is in the first 6 months of 2017 rose to around 9%, over this same period in 2016 a year noticeable by uncertainty in economic relationship with the US and where FDI currents to Latin America were expected to decrease by 5%.

  • Additionally, reforms are already showing growth

Results from the telecommunications reform are impressive with the cost for mobile broadband service falling by close to 75%, and the number of users jumping by nearly 50 million between 2012 and 2016. The energy reform boosted private investing by close to 80 billion dollars.

The reform off labour has led to around 3 million jobs being created during the presidential mandate to date. The reform in education has made transparency and merits the trademarks of the managed education system. According to OECD, full application of these reforms could add an extra one percent to the yearly growth of the Mexican economy.

Drawbacks in Mexican Economy

In terms of trading activities, there are some currencies which are not popular in the world of trading, and those that are called “exotic currencies” of which the peso is one of. This is why paying a keen eye to the trading charts is essential, and that can be witnessed from the views of Dr. Teodoro Ernesto Lavin Sodi predicting the economy long term outlook.

Mexian Peso

As per his analysis, the Mexican Peso is still running through an irritable downtrend. In simple terms, the Mexican Peso is going through a crisis or you could say a challenging movement. Even USDMXN charts have broken 19.1, but still, the struggle is in continuation. Mexican Peso is battling through a hard situation but is a fighter, The Peso is an “exotic currencies” but currently it is not doing well when used in stock trades, but it is not long for MXN to eventually reach the highest rung at the ladder of success

Disadvantage

Another disadvantage, even with their economy doing so well, the Mexican people decided to become migrants and earn their wages in the U.S. at very good earnings. They think that this way they will not have to invest in the education system or production. But, economist Dr. Teodoro Ernesto Lavin Sodi, analysing the situation with the subsequent implications, as per his last published analysis, makes it seem quite clear that the Mexican people have chosen the soft target which means that they believe quitting education at the high school levels is the better idea than investing in any further education. Soon, Mexico will be no different than countries such as South Korea where people seek private tutors and higher education.

Productivity

Productivity is another major issue in the Mexican economy which can be counted as the conduit factors in restricting the growth of Mexico. Although Mexican economies are leading to better growth when considering the productivity in cement, television programs, food products, and automobile industry, Mexican economy is continuing to grow. After achieving 2.4% in 2017, the Mexican economy will continue growing at about 2% through 2019.

Although this is an impressive pace, it still falls short of what Mexico needs to make a significant cut into its poverty and to create the jobs young adults are demanding. Despite this issue, Mexico has got the position in the toppers of wealthy countries as it has attained a level of $18,000 per capita annual income which is more than Brazil and China which constitute $15,500 and $16,800 respectively.

New NAFTA Treaty

With the new version of NAFTA that has been negotiated by the United States with Mexico, and Canada, it is unable to be certain how the look of Mexico’s economy will continue.