OECD Sees Fragile Economic Recovery In Mexico

By Agence France-Presse A fragile economic recovery is taking hold in Mexico but is fraught with risk, the Organization for Economic Cooperation and Development said Nov. 24, cutting its 2003 and 2004 growth forecasts. "The main risks to the outlook concern world oil prices, financial markets and, above all, the speed of the United States' recovery and how this translates into rising demand for Mexico's exports," the OECD said in a report. The OECD cut its forecasts for Mexico's gross domestic product growth (GDP) for 2003 to 1.5% from 2.5% previously and trimmed its 2004 forecast to 3.6% from 3.9%. The Paris-based organization said it expected growth to accelerate to 4.2% in 2005. But it said Mexico's growth performance had been unsatisfactory, even when recent global cyclical weakness was taken into account. "Potential GDP growth estimates have been revised down to below 4%, too slow for a country with low levels of income and productivity and high rates of population growth, and too slow to narrow the gap in living standards relative to other OECD countries," it said. Further reforms are therefore needed to raise productivity, and the aim should be to lift the country's potential growth rate by at least two percentage points to more than 6%, the OECD said. "The wide-ranging structural reforms of the past 15 years, including the entry into NAFTA [North American Free Trade Agreement], have not yet led to an unambiguous rise in labor or total factor productivity growth," it said. Copyright Agence France-Presse, 2003