Recently Fernando Aportela, Deputy Finance Minister, spoke about the economic perspective that is expected this 2015. This is the first year that the Ministry of Finance and Public Credit (SHCP by their initials in Spanish, Secretaria de Hacienda y Crédito Público) gives an estimate of growth as a range rather than an specific quantity.
As a preamble, last year’s economic growth estimate provided by the federal government was 3.9%, however it closed the year with a 2.2% growth, far lower than what it was predicted.
What is the meaning of these rates of economic growth? A growth rate of 2.1% means that for every 100 pesos that were produced in Mexico in 2013, in 2014 there were produced 2.1 pesos more, which is 102.1 pesos. Therefore it is necessary for an economy to produce more than what it was produced last year.
The way to increase the economic growth of a country is by increasing the value of goods and services produced by an economy in a given period. The three factors that determine how much produce and, therefore, the growth rate of a country are:
- Positive trade balance (export value greater than the value of imports)
In Mexico the most important factor is consumption, in particular private consumption, which accounts for 67% of production value, then private investment is 17%, and in a third level, with 11% of the total value of production, is consumption government. To get a boost in an economy it is imperative to develop the factors that are most representative.
By 2015 the SHCP expects a bigger growth than last year´s; this is mainly because Mexico is expecting that the structural reforms that were approved last year begin to stimulate the economy. During the seminar “Perspectivas Económicas 2015“, Sub secretary of the Ministry of Finance reported that the estimated growth range is between 3.2% and 4.2%. On the other hand, international institutions like the International Monetary Fund (IMF) and the World Bank have forecasted a 3.3% growth rate. Similarly, most of the experts in economics agree that the growth rate will be more skewed to the lower range given by the SHCP with a rate of expansion of 3.2% (El Universal, 2015) (Forbes MÉXICO, 2015).
The economic stoplight in Mexico, according to the economic Observatory “México ¿Cómo vamos?” right now is in red light and with a downward tendency; this means that Mexico is more than 25% below the target set by the Observatory, which is 6%. The panel of this economic Observatory said that “an increase of 6% is suitable for an economy of the size of Mexico and therefore this growth target is considered” (MÉXICO ¿Cómo vamos?, 2015). In addition to this, it is expected that the economic light, with respect to economic growth, will remain unchanged throughout the year.
The reasons why Mexico faces this low growth rate are mainly the reduction in oil prices, problems of corruption and lack of legal certainty and rule of law. Juan Carlos Moreno-Brid, expert of “México ¿Cómo vamos?” And Deputy Director of the sub regional headquarters of the United Nations Economic Commission for Latin America and the Caribbean, said that “the adverse external problems combined with the probable contraction in public expenditure makes difficult a strong rebound in the economy” (Animal Político, 2015).
Sources of information
Animal Político. (January 22, 2015). Animal Político. Retrieved on January 23, 2015, from http://www.animalpolitico.com/2015/01/economia-mexicana-esta-lejos-de-alcanzar-su-metas-en-2015-advierte-el-semaforoeconomico/
El Universal. (January 19, 2015). El Universal. Retrieved on January 23, 2015, from http://www.eluniversal.com.mx/finanzas-cartera/2015/fmi-proyecta-crecimiento-de-mexico-de-32-en-2015-1070097.html
Forbes Staff. (January 23, 2015). Forbes MÉXICO. Retrieved on January 23, 2015, from http://www.forbes.com.mx/banco-mundial-preve-menor-crecimiento-para-mexico-en-2015/
MÉXICO ¿Cómo vamos? (January 23, 2015). MÉXICO ¿Cómo vamos? Retrieved on January 23, 2015, from http://www.mexicocomovamos.mx/