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IMF Mexico Full Economic Status Report

IMF Mexico Full Economic Status Report

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Published by: Zimvi on Aug 09, 2011
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© 2011 International Monetary Fund
IMF Country Report No. 11/250
MEXICO
2011 ARTICLE IV CONSULTATION
 Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions withmembers, usually every year. In the context of the 2011 Article IV consultation with Mexico, thefollowing documents have been released and are included in this package:
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Staff Report
for the 2011 Article IV consultation, prepared by a staff team of the IMF,following discussions that ended on June 16, 2011, with the officials of Mexico on economicdevelopments and policies. Based on information available at the time of these discussions, thestaff report was completed on July 11, 2011. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
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Debt Sustainability Analysis
prepared by the IMF.
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Informational Annex
prepared by the IMF.
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Public Information Notice
(PIN) summarizing the views of the Executive Board asexpressed during its July 27, 2011 discussion of the staff report that concluded the Article IVconsultation.The document listed below has been or will be separately released.Selected Issues PaperThe policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.Copies of this report are available to the public fromInternational Monetary Fund
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Publication Services700 19
th
Street, N.W.
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Washington, D.C. 20431Telephone: (202) 623-7430
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Telefax: (202) 623-7201E-mail: Internet: http://www.imf.org
International Monetary FundWashington, D.C.
 
 
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MEXICO
STAFF REPORT FOR THE 2011 ARTICLE IV CONSULTATION
 
KEY ISSUES
Context
. Following a sharp decline in 2009, output growth has rebounded strongly,attesting to Mexico’s strong fundamentals and skillful policy making. Strong exportsare leading the recovery, with a rebound in domestic demand sustaining themomentum. Strong growth is envisaged to continue this year and into 2012, bringingoutput in line with potential, amid benign domestic inflationary conditions. Presidentialelections will take place in July 2012, with the new government in office in December.
Risks
. Important downside risks persist, linked to the global outlook. A more protractedslowdown in the U.S. would be a material drag to Mexico’s growth, given its closeintegration with the U.S. economy. Although the direct impact from unsettled marketconditions in Europe would remain contained (with the bank channel considered to bewell ring-fenced), a surge in global risk aversion and generalized flight to quality couldaffect even strong sovereign credits, like Mexico’s.
Policy Challenges
With Mexico’s economy expected to continue on a firm recovery, the challenge aheadis how to gradually adjust the overall policy stance and rebuild policy buffers, weighingdomestic cyclical conditions against the potential impact of increased global downsiderisks. As fiscal consolidation is judiciously underway, the central bank will need tocontinue assessing the evolution of domestic and external circumstances in the comingmonths in deciding the course of monetary policy going forward.Over the medium term, the task remains how to unleash Mexico’s growth potential andemployment generation, while tackling its long-term fiscal challenges. Advancingstructural reforms would be key to increasing Mexico’s growth, particularly in anenvironment of sluggish external demand. Addressing longer term fiscal challengesfrom oil revenues and age-related spending to ensure fiscal sustainability will require acombination of revenue mobilization efforts and expenditure rationalization.
 
July 11, 2011
 
2011 ARTICLE IV REPORTMEXICO 
2
 INTERNATIONAL MONETARY FUND
 
Approved By
Gilbert Terrier andAasim Husain
Discussions took place in Mexico, D.F., during June 6-16, 2011. Theteam comprised: Martin Kaufman (head), Enrique Flores, M.K. Tang (allWHD); Patrick Imam (MCM); Pablo Lopez Murphy (FAD); and Kai Guo(SPR). Messrs. Nicolás Eyzaguirre and Gilbert Terrier participated in theconcluding meetings.
CONTENTS
RECENT ECONOMIC DEVELOPMENTS __________________________________________________________ 4
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OUTLOOK AND RISKS __________________________________________________________________________ 14
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KEY POLICY ISSUES _____________________________________________________________________________ 15
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A. Near-Term Macroeconomic Policies___________________________________________________________ 15
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B. Global Spillovers_______________________________________________________________________________ 21
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C. Longer-Term Challenges______________________________________________________________________ 23
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STAFF APPRAISAL ______________________________________________________________________________ 27
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TABLES
1. Selected Economic, Financial, And Social Indicators, 2007–2012______________________________ 31
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2. Financial Operations of the Public Sector, 2006–2016_________________________________________ 32
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3. Summary of Balance of Payments, 2006–2016 _________________________________________________ 33
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4. Financial Soundness Indicators________________________________________________________________ 34
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5. Indicators of External Vulnerability, 2005–2011________________________________________________ 35
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6. Baseline Medium-Term Projections, 2006–2016_______________________________________________ 36
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 FIGURES
1. Evolution of the Real Sector, 2005–11___________________________________________________________5
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2. Monetary Policy, 2005–11_______________________________________________________________________8
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3. Fiscal Sector, 2006–11___________________________________________________________________________9
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4. Evolution of the External Sector, 2005–11_____________________________________________________ 12
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5. Financial Sector, 2005–11______________________________________________________________________ 13
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