Is Consumption a Long Lasting Driver of Mexico’s Growth?

Will Mexican Consumers Keep Spending?

Article published by the Inter-American Dialogue

(October 28, 2015)

 Household consumption is the largest component of GDP since it represents a little more than two thirds of domestic production. Thus, changes in its behavior can have strong impacts on growth. However, propelling growth by stimulating consumption through expansionary policies is only transitory. To promote sustainable growth and consequently create permanent and high-quality jobs, an economy requires to increase the accumulation of capital through fixed investment.

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MEXICO ECONOMIC OUTLOOK (2015-2017)

University of Toronto

Project LINK

United Nations, Department of Economic and Social Affairs

U.N. Headquarters, New York City

 October 21-23, 2015

 MEXICO

1. Recent Trends

In 2015, the economy performs at rates similar to those in the previous year, but below potential, with no major improvement. The economy started the year with moderation, affected by the slowness in the U.S. and the budget cut implemented by the Mexican government as a result of the shortfall in oil revenues. Inflation has adjusted down significantly given the absence of new taxes and the positive arithmetic effect of the comparison base. Monetary conditions remain expansionary, keeping the external imbalance under pressure.  Our Baseline scenario foresees an economy with no much improvement this year, advancing at still-limited rates since the impact of reforms will only be felt in the medium term. In the medium term, the economy will advance at rates determined by the increased production capacity.

Brecha de Tasas de Interés en América Latina (2015)

En Julio del 2015, determinamos las condiciones monetarias en América Latina a través de la estimación de la brecha de tasas de interés. Es decir, determinamos la posición de la política monetaria vigente en relación a su nivel de neutralidad, lo cual nos permitió determinar el grado de expansividad o restrictividad monetaria en cada país analizado. Un breve resumen fue publicado en América Economía*/ en el mismo mes. A continuación el análisis completo: