On Wednesday, the International Monetary Fund (IMF) advised Mexico to implement comprehensive structural changes and increase tax revenues.
This advice aims to boost the country’s economic situation, as the Central Bank of Mexico (Banxico) reported.
Based on the 2023 Article IV Consultation findings, the IMF sees potential in Mexico. They predict a growth of 3.2% in 2023, followed by 2.1% in 2024.
To achieve this, they believe Mexico needs solid economic policies and wide-ranging reforms.
These reforms should address current challenges. They should also prepare the economy for climate-related events, as per the IMF’s statement shared by Banxico.
The IMF’s board raised a concern. They believe Mexico should avoid a fiscal approach that might not help in the short term.
Instead, they stress the need for actions after 2025. This approach, they say, will ensure fiscal stability in the coming years.
One specific advice stands out. The IMF suggests Mexico increase its non-oil revenues. Currently, they lag behind other Latin American countries.
More fiscal space, they note, allows for more social spending and infrastructure projects.
The board also highlighted another crucial point. Mexico should focus on supply-side reforms.
This can enhance growth and living standards, especially by using global supply chains better.
Another key suggestion from the institution involves energy. The IMF encourages Mexico to use more renewable energy sources.
This shift will help as global hydrocarbon demand might decrease in the long run.
Lastly, the Mexican government has its own growth predictions. They expect growth between 2.5% and 3.5% for both 2023 and 2024.
For context, the IMF has conducted these Article IV Consultations since 1978. They help monitor and evaluate member countries’ economies.
Background
Historically, Mexico’s economy has shown resilience amid global challenges.
The country has a rich tapestry of trade ties, especially after signing the USMCA with the U.S. and Canada.
However, its heavy reliance on oil revenues has often posed challenges, especially with fluctuating global oil prices.
Diversifying its income sources can provide a more stable economic foundation. The IMF’s focus on renewable energy aligns with global trends toward sustainability.
This shift is not just environmentally crucial but also economically strategic.
By embracing structural changes and diversifying its economy, Mexico could position itself as a leader in the Latin American region.
Observers will be keenly watching the country’s next steps and their impact on its future growth trajectory.