The top priority of the Mexican government must be investment: OECD

The priority of the Mexican government to prop up economic growth should be investment, an area that had already been hit since before the outbreak of the Covid-19 pandemic, said Alberto González Pandiella, analyst for Mexico at the Organization for Cooperation and Development. Economic Development (OECD).

“To strengthen the recovery, we see it as essential to start the investment engine that had already been weakened before the pandemic. Without starting the investment engine, it will be difficult to achieve high growth rates, “he said in a virtual conference with the media.

This Wednesday, the OECD officially presented the update of its flagship report, “Economic Outlook”, where it lowered its expectations for the country’s Gross Domestic Product.

“The main reason (for our review) has been that, for the third quarter, we expected a slowdown in growth, but we did not expect that there would be a contraction of the economy as it occurred. There, we believe that the restrictions of the value chains hit Mexico harder than we expected, he explained.

The agency foresees that the Mexican economy will close with a growth of 5.9% in 2021 and have an expansion of 3.3% in 2022.

This reflects a deterioration with respect to the expectations of September when they expected an expansion of 6.3% for 2021 and 3.4% for 2022. For 2023 the growth forecast is 2.5 percent.

The Mexican government expects growth between 5.8 and 6.8% for 2021 and between 3.6 and 4.6% in 2022.

“The big priority is to get the investment started,” he said. “The great challenge, without a doubt, is investment,” he insisted.

According to González Pandiella, inflation (which is currently around 7% per year) is expected to begin to moderate in the second quarter of 2022 and this will be largely due to the gradual increase in interest rates that has been putting launching the central bank.

Inflation will remain

The OECD joins the list of specialists and observers who believe that inflation will linger longer than originally thought.

Jerome Powell, chairman of the US Federal Reserve, said Tuesday that the term “transitory” is no longer appropriate to refer to inflation.

“Inflation is here to last a little bit longer than was anticipated a few months ago. It is higher and also more permanent ”, warned Álvaro Pereira, director of economic studies at the OECD.

At the global level, the multilateral organization slightly lowered its GDP forecast to 5.6% this year, a decrease of 0.1 points compared to its expectation disclosed in September.

Projections for global activity in 2022 remain in line with their previous forecasts of 4.5% for 2022 and 3.2% for 2023.

This report was made before the appearance of the Omicron variant, detected a few days ago and whose consequences for the world economy are still uncertain and are not included in the estimates.

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