Mexico growth: can it hit 5 per cent?

September 18, 2012 12:01 am by Ron Buchanan
beyondbrics


Mexico could conclude the year with economic growth of as much as 5 percent, Gerardo Rodríguez, the deputy finance minister said Monday.
 
Good news indeed. Most analysts had been forecasting 4 per cent at most, while the International Monetary Fund has pencilled in 3.9 per cent. But there were two “ifs” in the minister’s bold forecast.
If the US economy achieves growth of at least 2 per cent, and if structural reforms are carried out in Mexico, 5 per cent would be in the frame by the end of the year, said Rodríguez.

While new data last month showed continued weakness in the US economy, the level is consistent with an economy growing at an annual rate of 2 per cent or less. And the only structural change still pending in Mexico has been the labor reform proposed by the outgoing president, Felipe Calderón, who leaves office on December 1.

A figure of about 4 per cent would still be very encouraging, however, for an economy that has seen average growth of about half as much a year for more than a decade.

It may be hard to imagine now, but there was a time, some 20 years ago, when the Mexican economy was bigger than Brazil’s. On the basis of official forecasts, this year, however, Brazil’s domestic product is expected to be $2.35 trillion while Mexico’s is likely to be $1.73 trillion.

But with the latest weekly survey of market economists from Brazil’s central bank putting GDP growth at 1.57 per cent, Mexico – whether it grows at 4 per cent or 5 per cent -is on its way to closing that gap.

As José Angel Gurría, the Mexican secretary general of the OECD said last week: “Now is the time for Mexico to merge from the middle ranks. Enough of mediocrity! Mexico can be a developed nation!”