The Organisation for Economic Co-operation and Development (OECD) is forecasting a slowdown in Mexico’s economic growth in 2024, but it’s not all doom and gloom. As the country navigates a bumpy global economic landscape, its construction sector and President Andrés Manuel López Obrador’s (AMLO) ambitious infrastructure projects could be the key to continued – if tempered – growth.
Private Development and Government Projects Drive the Charge
Speaking at the OECD’s Mexico Economic Study presentation, Secretary General Mathias Cormann credited private building projects and AMLO’s government-led infrastructure initiatives as the main sources of Mexico’s economic resilience. This focus on construction, coupled with the phenomenon of nearshoring (companies relocating manufacturing closer to home) delivered a respectable 3.1% GDP growth in 2023.
The OECD highlights Mexico’s long-term economic progress since joining the organization in 1994. Cormann notes impressive 73% growth in real GDP and a 30% increase in disposable income over the past three decades.
So What’s the Hold Up?
While the news is largely positive, there are challenges ahead. Despite Mexico’s economic gains, the OECD warns that a slowdown could be on the horizon. The projected growth for 2024 is 2.5%, reflecting the impact of a weaker US economy on Mexican exports. Inflation remains a lingering worry, prompting the possibility of interest rates staying high for longer.
The OECD highlights productivity and inequality as persistent issues that Mexico must tackle to truly maximize its potential, especially when it comes to taking full advantage of nearshoring opportunities.
My Perspective: Construction Key, Momentum is on Mexico’s Side
Mexico’s economic resilience amidst global uncertainty is a testament to the nation’s progress. AMLO’s strategic focus on infrastructure development is undoubtedly paying off, positioning Mexico to reap the benefits of a shifting global economy. The possibility of a slight slowdown in 2024 shouldn’t diminish the tremendous growth potential Mexico holds.
As nearshoring continues, Mexico is primed to become a manufacturing powerhouse. Of course, building the right infrastructure, enacting supportive policies, and developing a highly skilled workforce will be crucial to fully realizing this potential. While challenges like income inequality persist, Mexico’s construction-led revitalization lays a strong foundation for addressing these issues and ensuring even greater prosperity for all in the future.
The Way Forward
Mexico has made big strides since joining the OECD, and President Andrés Manuel López Obrador (AMLO) has undoubtedly implemented unprecedented initiatives for the nation. Currently, things are looking reasonably positive. However, for sustained, inclusive growth, the country needs a more diversified economic strategy. AMLO’s emphasis on construction offers short-term benefits, but to truly address deep-rooted issues like inequality and limited opportunities (flagged by the OECD), the Mexican government also needs to invest heavily in education, innovation, and social programs.
FAQ
Construction projects, both private and government-led, along with the opportunities from nearshoring.
No, the OECD predicts a slowdown in 2024 to 2.5% growth, mainly due to a weaker US economy impacting Mexico’s exports.
They’re impressed! Mexico’s economy has significantly expanded since joining the OECD in 1994.
Yes, inflation is a worry, and Mexico needs to address low productivity and inequality to make the most of its potential.
It needs the right policies and a highly-skilled workforce to become a competitive manufacturing center.
