Mexico: Macroeconomic Country Outlook
- GlobalData forecasts Mexico’s real GDP to grow by 2% in 2022
- Mexico ranked 45th out of 136 nations in the GlobalData Country Risk Index (GCRI) Q2 2022
- According to GlobalData, the industrial production index of the country grew by an average annual rate of 3.2% during January 2022 to June 2022
According to the World Economic Forum Travel & Tourism Development Index (2021), Mexico was ranked 40th out of 117 countries. During January to March 2022, the quarterly indicator of tourism GDP grew by 22.1% and interior tourism consumption by 25.7% on an annual basis. Mexican culture and geography are diverse. The country is a notable producer of hydrocarbons and minerals. It has a 3000-km border with the US and a free trade agreement with it. The nation is endowed with more than 11,100 km of coastline, a variety of terrain that includes desert, mountains, and rainforests, as well as a rich cultural heritage that includes several ancient cities.
Key findings
- Mexico stance on Russia: The President of Mexico denounced NATO's approach to the Russian invasion of Ukraine as "immoral”. Mexico has rejected joining the sanctions on Russia even though it has voted to condemn the invasion. A "Mexico-Russia Friendship Committee" was created in March 2022 with the assistance of six legislators from López Obrador's Morena party. Due to rising energy cost brought on by the Ukraine crisis, Mexico began to enhance its domestic natural gas production to fulfil domestic demand and reduce its dependency on imports. Mexico's domestic natural gas output grew by 15% during the first seven months of 2022, compared to same in 2021.
- Mexican economy to register growth below 2% in 2022: The government has been able to control the spread of COVID-19 since June 2020, leading to a better fiscal position than many other countries. An effective vaccination program and prudent government spending led to a quick rebound in economic activity. The Mexican economy grew by 4.8% in 2021. In Q1 2022, the GDP rose above its pre-pandemic level, propelled by strong domestic demand and a rebound in tourism from the second half of 2021. GlobalData forecasts the real GDP to grow by 1.9% in 2022, down from 4.8% in 2021. Mexico’s direct impact of Russia and Ukraine war is limited, but activities are likely to be hit by increasing commodity prices.
- Mexico ranks 60th out of 190 countries in the World Bank’s Ease of Doing Business ranking for 2020: According to the World Bank, Ease of Doing Business Report (2020), Mexico scored 72.4 out of 100 in terms of the ease of doing business. In order to start a business in Mexico, it takes eight procedures and eight and half days, compared to the Latin American and Caribbean average of 8.1 procedures and 28.8 days. Mexico ranked 11th in terms of getting credit and 33rd in terms of resolving insolvency out of 190 countries. However, it ranked 120th in terms of paying taxes and 106th in terms of getting electricity.
- Rich biodiversity: Mexico's biodiversity is noteworthy. According to the World Bank, Mexico is one of the few nations in the world with rich cultural history and diversity, along with abundant natural resources. Tropical forests have traditionally been a source of livelihood for the rural population and sustain a wide range of mammalian and aquatic species. Prominent rivers, which provide nearly 60% of the country’s total water, flow through these forests. The country is one of the world's major high biodiversity nations, with 707 known reptile species, 438 mammal species, 290 species of amphibians and 26,000 different species of flora, according to the National System of Information about Biodiversity, Mexico.
- 5G rollout: More than 48 million people benefited from the debut of 5G services launched by America Movil in February 2022, in 18 of Mexico's largest cities. Mexican telecom group America Movil expects to double the number of 5G sites in Mexico by the end of 2022. In December 2021, AT&T used spectrum in the 2.5 GHz range to introduce 5G services in Mexico. Initially AT&T covered two cities in Mexico, including Cuauhtémoc and Napoles districts. AT&T Mexico launched 5G services in five new cities across the country in 2022 and expects to reach 25 new cities before the end of 2022.
- Mexico embarks on energy reform and renewables: Hydropower, solar, wind, and geothermal energy are all types of renewable energy that Mexico has already produced. With installed solar photovoltaic (PV) generation capacity of just over 7 GW in 2021, the nation has the second-largest solar energy sector in Latin America, after Brazil. About 7.7 GW of Mexico's electricity came from wind energy, and 976 MW from its geothermal resources. It also has bioenergy, geothermal, and nuclear power facilities. By 2024, 35% of the electricity generated in Mexico is expected to come from clean energy sources, according to the target set by the Government of Mexico’s (GoM) energy transition law. With 26.7% of its electricity coming from renewable sources in 2021, Mexico is well on its way to achieving this objective.
Key fundamentals
Sectoral outlook
- Tourism industry in Mexico to recover gradually: According to the Mexico’s Tourism Department, 10.26 million foreign tourists visited Mexico in the first half of 2022, finally reaching pre-pandemic levels. International arrivals from January to June of 2022 were up 1.5% from 10.11 million foreign travelers, who visited Mexico during the first half of 2019. According to GlobalData, the total number of international arrivals in the country increased from 25.4 million in 2020 to 32.9 million in 2021 and is forecast to reach 36.5 million in 2022 and 38.6 million in 2023.
- Automotive sector outlook: Mexico is one of the top ten manufacturers of passenger vehicles in the World. According to the Mexican Automotive Industry Association (AMIA) and ITA – Office of Transportation and Machinery, the total production of passenger vehicles is forecast to increase to 3.5 million vehicles in 2022 from 3 million vehicles in 2021. The forecast for number of vehicles exported, to marginally increase from 2.71 million in 2021 to 2.73 million in 2022.
- Construction sector outlook: GlobalData expects Mexico’s construction industry to record an annual average growth rate of 2.3% over the remainder of the forecast period (2023–26), supported by investments in residential, transport, electricity, Liquefied Natural Gas (LNG) and telecommunication infrastructure projects. In May 2022, the largest Mexican financial institution, BBVA México, announced that it will grant MXN92 billion ($4.5 billion) in loans to the country’s housing sector this year. Despite maintaining its growth momentum, Mexico’s construction industry output is only expected to return to pre-pandemic levels in 2026. Surging inflation, high construction material cost, and supply chain and logistical disruptions will continue to weigh on construction output growth in the short term.
GlobalData Country Risk Index (GCRI) – Q2 2022
Mexico ranked 45th out of 136 nations in the GCRI Q2 2022. The country’s score is in the low-risk nations band (between 30 and 40). Mexico’s overall risk score is lower than the Latin America (47.5) and world averages (44) in the GCRI Q2 2022. The country had an overall score of 36.4, where the macroeconomic risks score was 29.9 (lower than Latin America (45.6) and environment risk score at 30.3, lower than the world average of 31.1 in Q2 2022.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Latin American countries in this publication include Argentina, Brazil, Chile, Colombia, Mexico, Peru, Venezuela and Ecuador.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Macroeconomic Outlook Report: Mexico
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