Mexico: Economic and Political Overview
In this page: Economic Outline | Political Outline | COVID-19 Country Response
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 2.1% in 2022, mainly due to 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 1.2% for 2023 and 1.8% for 2024.
The country recorded a budget deficit of an estimated 3.7% in 2022, a rate that should slightly fluctuate in 2023 and 2024, reaching 4% and 2.6%, 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 56.8% in 2022 and is expected to remain stable in the upcoming years, at 58.7% in 2023 and 59% in 2024. Inflation has been above target since 2017, and it further increased in 2022, reaching an estimated 8%, 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 2022. However, inflation is expected to decrease to 6.3% in 2023 and 3.9% in 2024, 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 has been gradually recovering since the pandemic. In 2022, Mexico's unemployment rate slightly decreased to 3.4% and it is expected to reach 3.7% in 2023 and remain stable in 2024. 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 | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 1,090.52 | 1,272.84 | 1,414.10 | 1,663.16 | 1,732.95 |
| GDP (Constant Prices, Annual % Change) | -8.0 | 4.7 | 3.1 | 1.8 | 1.6 |
| GDP per Capita (USD) | 8,533 | 9,869 | 10,868 | 12,674 | 13,098 |
| General Government Balance (in % of GDP) | -2.9 | -3.4 | -4.2 | -4.1 | -2.6 |
| General Government Gross Debt (in % of GDP) | 60.1 | 58.7 | 56.0 | 55.6 | 55.8 |
| Inflation Rate (%) | 3.4 | 5.7 | 7.9 | 6.3 | 3.9 |
| Unemployment Rate (% of the Labour Force) | 4.4 | 4.1 | 3.3 | 3.3 | 3.5 |
| Current Account (billions USD) | 22.79 | -8.21 | -13.42 | -16.64 | -17.33 |
| Current Account (in % of GDP) | 2.1 | -0.6 | -0.9 | -1.0 | -1.0 |
Source: IMF – World Economic Outlook Database, Latest available data
Note : (E) Estimated data
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 accounts for 3.9% of Mexico’s GDP and employs 12.5% of the country’s active population. 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. The agricultural sector suffers from occasional droughts and other issues related to climate and, in 2021, agricultural production decreased mainly due to significant droughts in Northern Mexico.
Industry employs 25.5% of the workforce and represents 30.8% of GDP, according to the World Bank. In 2022, employment in manufacturing continued to benefit 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 59.2% of GDP and employs 62% 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 the past couple of years.
| 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 | 30.8 | 59.2 |
| Value Added (Annual % Change) | 2.5 | 5.4 | 4.3 |
Source: World Bank, Latest available data.
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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.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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- National Action Party (PAN): centre-right to right wing, liberal conservative, Christian democratic party.
- Institutional Revolutionary Party (PRI): centre to centre-left, oldest political party in the country, constitutionalist, technocratic, social conservative, big tent party.
- National Regeneration Movement (MORENA): centre-left to left wing, anti-neoliberalism, left-wing nationalism, populism.
- Ecologist Green Party of Mexico (PVE): centre-right, environmentalist, conservative.
- Labour Party (PT): left-wing, social democratic, labourist, left-wing nationalist.
- Citizens' Movement (MC): centre-left, social democratic, progressist.
- Party of the Democratic Revolution (PRD): centre-left to left wing, social democratic party.
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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Latest update: May 2023
