“Mexico’s open and liquid financial markets have bolstered foreign portfolio and direct investments in recent years and can facilitate adjustment to external shocks. Mexico has in place very strong policy frameworks aimed at maintaining prudent macroeconomic policies.”
-David Lipton, First Deputy Managing Director and Acting Chair, IMF
It’s no secret that Mexico has been making great strides in growth, stability, and economic change of late. 2014 was a year that during which the continuation of a grand reform strategy that was set in motion in 2013 began to bear fruit. The past twelve months have begun to evidence the momentum that reform and economic policy change has made possible the prospect for a positive economic outlook for Mexico in 2015.
Gross Domestic Product (GDP)
While Mexico’s GDP has grown at a somewhat sluggish pace in recent years, reforms of important parts of the economy have turned this state of affairs around in ways that are beginning to become apparent. Real GDP grew by less than 1.5% in 2013, however, a new upward trend in the growth of domestic product has played itself out over the past 12 months. It is projected that this trajectory will create a positive economic outlook for Mexico in 2015, and beyond. While 2014 saw an increase in the GDP growth rate of 2%, many economists now forecast that 2015 will see a GDP boost of 3.5%
There are several positive indicators that add credence to the bullish prognostication described above, and foretell an increase in foreign direct investment (FDI), and inevitably resultant economic growth.
- Factory Exports: Mexican exports recently hit a record high month over month growth rate in late 2014, sales abroad jumped by 5.4% in October – the highest increase registered in five years. The automotive industry played a crucial role in this overall growth with an industry increase of 8.5%.
- New IMF Credit: The prediction of a positive economic outlook for Mexico in 2015 received another vote of confidence from the IMF in November when the executive board authorized a new credit line for Mexico of $70 billion. The international body felt justified in making this line of credit available due to Mexico’s commitment to significant reform, and to its business friendly economic policies.
- International Reserves: Yet another record has recently been set, providing another favorable factor in determining Mexico’s financial future. In 2014, the central bank managed to accumulate a record $193 billion in international reserves. This represents an increase of 9.3% over last year. The increase reflects renewed stability, and the future ability to withstand external shocks. Mexico’s cash position is another reason why foreign investors are bullish on the country’s future economic prospects.
- Bullish Investors: Mexican billionaire, Carlos Slim, recently announced that he is so confident in the positive economic outlook for Mexico in 2015 that he is investing $4 billion of his own fortune in new and existing domestic ventures.
- Congressional Budget: In a telling move, Mexico’s Congress recently passed a budget for 2015 in which the anticipated GDP growth goal was 3.7%. Such a high goal demonstrates how well-founded economic predictions are for a growth rate of 3-3.5% in 2015.