Mexico’s Economic Growth Looks Set to Continue

Mexico is currently experiencing significant growth in their economy. With improvements in connectivity and infrastructure, opportunities for investment are growing, and the wealth gap is significantly decreasing across the Mexican populace. The projections for the future look very promising, and moving into the next few years and beyond, Mexicans can be cautiously optimistic that their country will continue to grow and thrive.

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Why is Mexico’s Economy Improving so Much?

As was explained by El Pais, public policy changes have made Mexico far more attractive to investors in recent years. These policies have included comprehensive labour reforms and strategic financial management, leading to a significant increase in private and public investments.

In this short period, Mexico has achieved quite a lot on the economic front. Not only do they currently have their lowest ever unemployment rate, but they have also managed to simultaneously increase social spend and public investment; a move that usually results in economic problems. Yet the economy is improving and poverty rates have even declined in this time.

As a result of these changes, domestic consumption has greatly increased. At the end of the pandemic, Mexico’s internal market contributed significantly more to economic growth than in the past. Previous crises usually saw a higher dependency on exports, which led to the devaluation of the currency. Of course, their export industry is also very strong, and is largely made up of electronics, cars and agricultural goods. The industry grows almost every year, which can be partly explained by having a number of free trade agreements with other countries that basically eliminate tariffs.

Investments in Mexico are now higher than they have ever been, and are the primary driver of Mexico’s economic growth. Both public and private investment grew by around 20% in 2023 from the previous year. Additionally, inflation has been contained and interest rates are reducing as well. With such a solid foundational economic environment, investments are expected to grow, leading to further development.

Growth in Mexico’s GDP

The overall gross domestic product (GDP) growth into the future is looking promising. Going back to the Covid-effected 2020, the growth was at -8.65%, before bouncing back to 5.84% the very next year. This isexpected to continue growing all the way through to 2028, at rates between 1.46% and 2.14%. These are very good results, with the country having been more negatively affected by the 2002 South American crisis than some other countries.

How Mexico Plan to Keep Growing

The future of Mexico’s economy looks so bright because of growth in infrastructure and good strategies moving forward. For example, biorefineries are set to power the economy well into the future. Mexico is building biorefineries that can turn seaweed, sugar cane and different oils into fuel and pharmaceuticals.

Professor Jhuma Sadhukhan of Surrey’s School of Civil and Environmental Engineering was part of a large study in conjunction with Mexico’s Instituto Mexicano del Petroleo. He explained that “Around the world, businesses are turning biomass into shoe soles, or skin cream. With the right investment and the right plan, there is no reason Mexico cannot lead the world in this growing industry”.

This approach could have a multitude of benefits for Mexico. Biological material is renewable and absorbs carbon dioxide while growing. Mexico has the capacity to produce 20 million tonnes of seaweed a year, which contains proteins and chemicals that can be used to make shoes, packaging and face cream. Large facilities can be built, meaning more products can be made in the same place, which is much better for the environment, as is the fact that they can generate energy and heat as well.

Whilst investment around such potentially high projects is complicated, there seems to be a lot of potential in this particular money stream, and if handled correctly, biorefineries could be a very significant part of the Mexican economy for years to come.

But there are other significant infrastructural changes being made. For example the Mayan Train is currently being built, which will cover 1525 kilometres, and connect the states of Chiapas, Tabasco, Campeche, Yucatán and Quintana Roo. It is believed the project will create 4000 direct jobs and a further 7500 indirect jobs. Additionally, the opening of Felipe Ángeles International Airport in 2022 and Tulum International airport in recent months, will allow for greater connectedness within Mexico, and from Mexico to the outside world. The Tulum Airport is capable of handling well over five million passengers every year.

The Interoceanic Corridor also helps to improve connectivity and mobility, providing economic opportunities likely to decrease the inequalities between northern and southern Mexico. Additionally, the investment in large amounts of infrastructure specifically in southern areas is already lifting people out of poverty. These areas are growing at twice the rate of the rest of the country by average, which is significantly narrowing the opportunity gap in the country.

Conclusion

Of course, it is important to be only cautiously optimistic about these things. Mexico has just experienced multiple years of outpacing their expected economic growth, which is of course a positive outcome, but it also highlights the uncertainty around predictions. Nonetheless, Mexico did bounce back extremely well after the Covid-19 pandemic. Each year since has seen a growth of between 3% and 4%. This level of growth is expected once again in 2024.

Despite many challenges, Mexico’s status as one of the strongest economies in the Americas seems set to continue. The country is growing all the time, both in terms of economy and infrastructure, and prudent policy will ensure a very strong future. Now is a great time to send money to Mexico with e-Pocket. We offer safe, secure transfers and excellent customer service. You can learn more about the countries on our platform by visiting our blog page.