OECD ECONOMIC SURVEYS: MEXICO 2019
Towards stronger and more inclusive growth Mexico City, 2 May 2019 http://www.oecd.org/economy/surveys/mexico-economic-snapshot/
OECD Economics OECD
Key Messages • Continue pursuing strong macroeconomic policies to maintain resilience to shocks. • Strengthening institutional quality will be key to making all other reforms effective, boosting growth and improving well-being and equity.
• Many policies will allow for more robust and inclusive growth.
2
Growth has decelerated
3
Oil production is weighing on economic activity GDP by sector 2013Q1=100 130
130 GDP
Agriculture
Mining
Manufacturing
Services
Construction
120
120
110
110
100
100
90
90
80
80
70 2013 Source: INEGI.
2014
2015
2016
2017
2018
70
4
Investment is low 2013Q1=100 GDP
Consumption
Investment
Exports
140
140
135
135
130
130
125
125
120
120
115
115
110
110
105
105
100
100
95
95
90 2013
2014
2015
2016
2017
2018
90
Source: INEGI. 5
Growth will remain moderate % change
2018
2019
2020
2.0
1.6
2.0
Private consumption
2.2
1.3
2.2
Government consumption
1.4
-0.6
0.3
Gross fixed capital formation
0.6
-1.8
2.2
Exports of goods and services
5.7
2.9
4.9
Imports of goods and services
6.2
4.2
4.5
Consumer price index
4.9
3.8
3.6
Current account balance (% GDP)
-1.8
-1.9
-1.8
Gross domestic product (GDP)
Source: OECD. 6
Growth has not been strong enough to allow for convergence to higher living standards % of OECD avg
% of OECD avg 48
115 GDP per capita (LHS)
Labour productivity (LHS)
Labour utilisation (RHS)
47
113
46
111
45
109
44
107
43
105
42
103
41
101
40
99
39
97
38 95 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Note: GDP per capita and labour productivity relative to the OECD average in constant PPP-adjusted USD terms. Labour productivity is GDP per hour worked. Labour utilisation is hours worked per capita. Source: OECD Productivity Database.
7
Growth has mainly reflected a population bonus Decomposition of potential GDP growth % per year 4.0
4.0 Capital per worker
Employment rate
Participation rate
3.5 3.0
3.5 Working-age population
TFP
Potential growth
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
-0.5
-0.5
-1.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-1.0
Source: OECD Analytical Database; OECD Demography and Population Database. 8
Female labour market participation remains low %
% of 15-64 year old women, 2017
% 90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
TUR MEX CRI ITA CHL LAC4 KOR GRC BRA POL BEL COL HUN PEER SVK LUX IRL FRA USA CZE ISR OECD JPN ESP SVN PRT AUT AUS GBR DEU LVA LTU FIN EST CAN NLD NOR DNK NZL CHE SWE ISL
90
Note: LAC4 is an unweighted average of Brazil, Chile, Colombia, and Costa Rica. PEER is an unweighted average of the 10 non-Latin American OECD countries with the lowest PPP-adjusted GDP per capita: Estonia, Greece, Hungary, Latvia, Lithuania, Poland, Portugal, Slovak Republic, Slovenia, and . Turkey. Source: OECD Social Protection and Well-Being Database.
9
70 70
60 60
50 50
40 40
30 30
20 20
10 10
0 0
Source: CONEVAL (Consejo Nacional de EvaluaciĂłn de la PolĂtica de Desarrollo Social).
Chiapas
Oaxaca
Guerrero
Veracruz
Puebla
Michoacan
Tlaxcala
Tabasco
Hidalgo
Morelos
Zacatecas
State of Mexico
Poverty
San Luis Potosi
Campeche
Guanajuato
Yucatan
Nayarit
Durango
Colima
Tamaulipas
Jalisco
Queretaro
Sinaloa
Chihuahua
Quintana Roo
Aguascalientes
Sonora
Mexico City
Coahuila
Baja California
Baja Calif. Sur
Nuevo Leon
Poverty rates are high and differ greatly across states Poverty and extreme poverty per state %, 2016
80 Extreme poverty 80
10
Well-being varies greatly across states Well-being indicators for Mexico and OECD countries 2014 or latest available year
Unemployment rate
Life expectancy at birth 10
Disposable income per capita
8 S80/S20 disposable income quintile ratio
Gini (at disposable income, after taxes and transfers)
6 4
Share of labour force with at least secondary education
2
Homicide rate
0 -2
Poverty rate after taxes and transfers, Poverty line 50%
Employment rate
Air pollution, level of PM2.5
Voter turnout in general elections
Gini before taxes and transfers Standardised mortality rate
OECD
Mexico
Share of households with internet broadband access Perception of corruption
MEX - Best
Note: Indicators are normalised to a range of 0 (worst) to 10 (best) computed over OECD countries and Mexican states. Source: OECD Regional Well-being database.
MEX - Worst
11
Infant mortality rates are the highest in the OECD Probability of dying between birth and age 1 per 1000 live births, 2017
14
12
12
10
10
8
8
6
6
4
4
2
2
0
0
ISL SVN FIN JPN EST LUX NOR SWE CZE ESP KOR AUT ISR ITA AUS IRL BEL DEU PRT NLD LTU FRA LVA OECD DNK CHE GBR HUN POL PEER GRC NZL CAN SVK USA CHL CRI ARG LAC5 TUR MEX PER COL BRA
14
Source: World Health Organisation.
12
Mexico has one of the highest rates adult obesity in the OECD Obese or overweight population Measured or self-reported, %, 2017 or latest available year 45
45 Obese
Overweight 40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
JPN KOR ITA NOR SWE NLD AUT SVK DEU LTU POL ESP DNK FRA GRC BRA EST BEL CZE COL ISR FIN ISL SVN LUX IRL LVA OECD CRI PEER GBR AUS CAN PRT TUR HUN NZL MEX CHL USA
40
Note: Data for Mexico refer to 2016. Source: OECD Health Statistics Database.
13
Spending on health is low Total expenditure per capita on all healthcare services PPP-adjusted current USD, 2017 or latest available year 12,000
10,000
10,000
8,000
8,000
6,000
6,000
4,000
4,000
2,000
2,000
0
COL MEX TUR CRI LAC5 BRA LVA CHL POL LTU HUN EST PEER SVK GRC CZE SVN ISR PRT KOR ESP ITA NZL OECD FIN GBR AUS ISL JPN BEL CAN FRA DNK NLD AUT IRL SWE DEU NOR LUX CHE USA
12,000
Source: OECD Health Statistics Database.
0
14
Air pollution is high, impacting on health and labour productivity Mean population exposure to PM2.5 emissions Micrograms per
m3
Micrograms per m3 of air
of air
35
35 Paris
London
Tokyo
Mexico City
New York (Greater)
30
30
25
25
20
20
15
15
10
10
5
5
0 2010
2011
2012
2013
2014
Note: Refers to the mean number of microgrammes of PM2.5 per cubic metre of air people are exposed to. Source: OECD Environment Database.
2015
2016
0 2017
15
The macroeconomic framework is strong
16
Inflation has moderated % 13
Headline inflation
Core inflation
Inflation target
% 13
Non-core inflation
12
12
11
11
10
10
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0 2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
0
Note: The grey area in represents the inflation target range. Source: Banco de MĂŠxico. 17
Monetary policy is appropriately tight % 10
% 10 Neutral nominal interest rate
Policy rate
Real interest rate (policy rate - 1 day)
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
-2 2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Note: The (ex-ante) real interest rate is calculated as the policy rate minus inflation expectations for the next 12 months. The grey area represents the neutral nominal interest rate range. Source: Banco de MĂŠxico.
-2
18
Fiscal performance has improved % of GDP
% of GDP 5
30 PSBR
Primary balance
Revenue (RHS)
Expenditure (RHS)
3
25
1
20
-1
15
-3
10
-5
5
-7
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Note: The primary balance in 2017 is net of one-offs. PSBR: Public sector borrowing requirement. Source: Secretaría de Hacienda y Crédito Público.
0
19
Fiscal prudence needs to be maintained Public debt scenarios, % of GDP 70
70 Low oil prices
High growth
Low growth
High interest rate
Baseline
65
65
60
60
55
55
50
50
45
45
40 40 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Source: OECD Secretariat estimates based on data from SHCP (Secretaría de Hacienda y Crédito Público). 20
Finding resources for more equitable growth
21
Tax revenue collection is low Total tax revenue % of GDP 40
% of GDP 40 OECD
35
35
30
30 LAC
25
25
20
20
15
15 MEX
10
10
5
5
0 2012
2013
2014
2015
2016
0 2017
Source: OECD Global Revenue Statistics Database. 22
The tax and transfer system does little to reduce inequality 0.70
0.70 Gini (market income, before taxes and transfers)
Gini (disposable income, post taxes and transfers) 0.60
0.50
0.50
0.40
0.40
0.30
0.30
0.20
0.20
0.10
0.10
ISL CHE KOR SVK NOR TUR CAN SWE ISR NLD CZE DNK SVN HUN EST POL NZL AUS PEER OECD LVA MEX LUX CHL BEL AUT DEU JPN FIN GBR USA LTU FRA ESP ITA PRT CRI GRC IRL
0.60
Source: OECD Income Distribution and Poverty Database.
23
The VAT revenue ratio is the lowest among OECD countries VAT Revenue Ratio 100
100
90
90
80
Increasing share of potential VAT revenues collected
80 70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
MEX ITA TUR COL ESP GRC GBR POL CRI ARG CAN BEL FRA PRT SVK AUS IRL LAC5 LTU NLD PEER FIN ISL PER LVA DEU OECD NOR HUN SVN AUT DNK SWE CZE ISR CHL CHE KOR JPN EST LUX NZL
70
Source: OECD Consumption Tax Trends; OECD Revenue Statistics in Latin America and the Caribbean.
24
There is room to increase revenues and the progressivity of Personal Income Tax Income threshold where single taxpayers start paying the top statutory PIT As a multiple of the average wage, 2017 30
25
25
20
20
15
15
10
10
5
5
0
0
HUN LVA EST CZE BEL ISL NZL DNK NLD SWE NOR FIN IRL CRI POL AUS ARG ESP ITA BRA LUX TUR CHE SVK KOR GBR GRC CAN ISR OECD SVN DEU CHL AUT USA IND JPN COL FRA PRT MEX
30
Source: OECD calculations based on the Taxing Wages models; OECD Taxing Wages in Latin America and the Caribbean (2016), OECD Taxing Wages (2018), OECD Tax database.
25
Recommendations to increase tax collection
Measure
Change in the fiscal balance (percentage points of GDP)
Reduce exemptions in CIT
Up to 0.52
Reduce exemptions in PIT
Up to 0.97
Broaden the VAT tax base
Up to 1.36
Raise property taxes to the LAC average (0.6%)
0.30
Reduce exemptions and subsidies in the state tax on motor vehicles (tenencia)
0.05
Raise the efficiency of state payroll tax collection (nómina) Potential increase in fiscal revenues of implementing all tax recommendations
Source: World Bank (2016) and Secretaría de Hacienda y Crédito Público (2018).
0.15-0.20 3.4
26
Social spending is low Social spending % of GDP, 2017 or latest year available 35 30
35 Old age
Health
Other
Labour market
30 25
20
20
15
15
10
10
5
5
0
0
MEX KOR CHL TUR AUS IRL CHE LTU ISR ISL LVA SVK CAN NLD EST USA OECD POL NZL CZE HUN LUX JPN SVN GBR PRT ESP GRC DEU NOR ITA SWE AUT BEL DNK FIN FRA
25
Source: OECD Social Expenditure Database.
27
Recommendations to improve social spending Measure
Reduction in spending (percentage points of GDP)
Reduce administrative and insurance costs in the health sector from 9% of total current expenditures to the OECD average of 3%
0.15
Eliminate beneficiary overlaps across the different health insurance schemes
0.15
Eliminate leakages in social assistance programmes benefiting the top 40% of the income distribution
0.10
Potential reduction in spending of implementing all social spending recommendations
0.4
Source: World Bank (2016) and SecretarĂa de Hacienda y CrĂŠdito PĂşblico (2018).
28
Reforms to re-ignite productivity and achieve stronger and equitable growth
29
There is large potential for policy reforms to raise living standards % difference from baseline GDP per capita (no policy change) scenario by policy area 12
10
Rule of law
Educational attainment and inequality
Product market reform
Investment
R&D spending
Total
12
10
8
8
6
6
4
4
2
2
0
0
-2
2020
2025
Source: Estimates based on “OECD Long-Term Scenarios for the World Economy� database.
2030
-2
30
Institutions
31
The quality of Mexico’s institutions is low Control of corruption, 2018 Index, -2.5 to 2.5 (best)
-0.2
-0.2
-0.4
-0.4
-0.6
-0.6
-0.8
-0.8
-1.0
-1.0
OECD
0.0
CHL
0.0
PEER
0.2
CRI
0.2
LAC5
0.4
MYS
0.4
IDN
0.6
ARG
0.6
CHN
0.8
DAE
0.8
COL
1.0
PHL
1.0
BRA
1.2
MEX
1.2
Note: LAC5 is a simple average of Argentina, Brazil, Chile, Colombia and Costa Rica. DAE is a simple average of People’s Republic of China, Indonesia, Malaysia, the Philippines, Thailand and Viet Nam. Source: World Bank World Governance Indicators.
32
Recommendations to improve institutional quality • Complete the implementation of the National and Local Anticorruption Systems reforms and monitor the results. • Consider introducing a specialist, independent anticorruption agency that takes into account the federal structure of the government. • Continue efforts to reduce impunity. • Ensure that the competition authorities and sector regulators have adequate resourcing and independence to carry out their mandates effectively. 33
Strengthening financial inclusion and competition in the banking sector
34
Competition in the banking sector is low Spread between lending and deposit rates, 2017 %
% 16
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
0
ISR FIN BEL DNK AUT EST PRT ITA LTU DEU NOR AUS LVA SVK POL CZE TUR GRC BRA MEX ARG
Source: Bankscope and Orbis Bank Focus, Bureau van Dijk (BvD); IMF, Financial Soundness Indicators database.
0
35
Mexican SMEs face high borrowing costs
25
25 Spread between interest rate for SMEs and large enterprises
Interest rate for SMEs
20
15
15
10
10
5
5
0
0
POL BEL FRA KOR SWE AUT NLD SVN LUX ESP CZE GRC CHE USA EST ISR GBR PEER DNK PRT ITA LVA OECD FIN HUN SVK AUS IRL CAN NZL CHL COL MEX BRA
20
Source: OECD (2018), Financing SMEs and Entrepreneurs 2018: An OECD Scoreboard.
36
Financial inclusion remains low Share of adults holding an account %, 2017 100
100
90
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
PHL
MEX
PER
COL
IDN
TUR
ZAF
BRA
CHL
HUN
RUS
IND
CHN
THA
MYS
POL
0
Source: World Bank, Global Findex database (2017). 37
Recommendations to strengthen financial inclusion and competition in the banking sector • Accelerate the current initiatives to enhance financial inclusion, financial literacy and competition. Monitor outcomes.
• Move towards making all government transfers to households through bank accounts or electronic means.
38
Lowering high informality rates
39
Informality remains high %
%
As a share of the total employed population
70
70 Formal
Informal
Source: OECD calculations based on data from INEGI (ENOE).
2018Q4
2018Q3
2018Q1
2017Q3
2017Q1
2016Q3
2016Q1
2015Q3
2015Q1
2014Q3
2014Q1
2013Q3
2013Q1
30
2012Q3
30
2012Q1
35
2011Q3
35
2011Q1
40
2010Q3
40
2009Q3
45
2009Q1
45
2008Q3
50
2008Q1
50
2007Q3
55
2007Q1
55
2006Q3
60
2006Q1
60
2005Q3
65
2005Q1
65
40
Informal but legal firms account for a large share of workers Distribution of workers by firm size (number of workers) and type % share, 2013 30
30 Legal and formal
Mixed
Legal and informal
Illegal and informal
25
25
20
20
15
15
10
10
5
5
0
1-5
6-10
11-50
51+
0
Note: 'Legal and formal' firms employ only legal, salaried workers. 'Mixed' firms employ some legal, salaried workers and some non-salaried, informal workers. 'Legal and informal' firms employ non-salaried, informal workers. 'Illegal and informal' firms hire illegal salaried workers. Source: Levy (2018), Under-rewarded Efforts: The Elusive Quest for Prosperity in Mexico.
41
Informal but legal firms have the lowest productivity levels Revenue productivity by firm size (number of workers) and type % difference in revenue productivity relative to legal informal firms with 1-5 workers, 2013 90
90 Legal and formal
Mixed
Legal and informal
Illegal and informal
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
-10 -20
-10 1-5
6-10
11-50
51+
-20
Note: 'Legal and formal' firms employ only legal, salaried workers. 'Mixed' firms employ some legal, salaried workers and some non-salaried, informal workers. 'Legal and informal' firms employ non-salaried, informal workers. 'Illegal and informal' firms hire illegal salaried workers. Source: Levy (2018), Under-rewarded Efforts: The Elusive Quest for Prosperity in Mexico.
42
Employers’ social security contributions are high for low-income earners Single-earner married couple, 2 children % of total labour cost 15
15 MEX
OECD
14
14
13
13
12
12
11
11
10
10
9
9
8
50
55
60
65
70
75
80
85
90
95
100 105 110 115 120 125 130 135 140 145 150
8
% of average worker's earnings Source: OECD Public Sector, Taxation and Market Regulation Database. 43
Tax compliance costs are high Postfiling index Score from 0 to 100 (best)
30
20
20
10
10
0
0
EST
30
LVA
40
DEU
40
USA
50
ESP
50
CRI
60
OECD
60
PEER
70
CHL
70
TUR
80
LAC5
80
COL
90
ARG
90
MEX
100
BRA
100
Note: LAC5 is an unweighted average of Argentina, Brazil, Chile, Colombia, and Costa Rica. PEER is an unweighted average of the 10 non-Latin American OECD countries with the lowest PPP-adjusted GDP per capita: Estonia, Greece, Hungary, Latvia, Lithuania, Poland, Portugal, Slovak Republic, Slovenia, and Turkey. Source: World Bank Doing Business 2019.
44
Recommendations to incentivise informality • Implement a coordinated approach to reduce informality, comprising:
– Lower administrative burdens to doing business – Lower tax compliance costs – Lower dismissal costs – Stepping up social protection. • Lower social security contributions for low wage earners • Set minimum protection standards for all type of labour relationships
• Step up enforcement • Lead by example and progressively reduce the number of informal workers in the public sector
45
Improving access to and the quality of education
46
Education outcomes are low 2015 PISA results Score
%
500
70
480
60
460
50
440
40
420
30
400
20
380
10
360
Mexico
OECD
Overall PISA score
Source: OECD PISA Database.
Mexico
OECD
0
% low performers
47
Youth not in education, employment or training are predominantly women (NEETs) % of young people aged 20-24 who are not in education, training or work by gender, 2016 50
50 Women
45
Men
45
Source: OECD Education at a Glance Database.
TUR
MEX
COL
CRI
ITA
GRC
ESP
FRA
PEER
ISR
PRT
HUN
POL
OECD
SVK
LVA
0
EST
0
GBR
5
NZL
5
USA
10
CZE
10
FIN
15
BEL
15
CAN
20
AUS
20
LTU
25
AUT
25
DEU
30
NOR
30
SVN
35
NLD
35
DNK
40
ISL
40
48
Recommendations to improve access to and the quality of education • Raise the quality and coverage of early childhood education and care programmes and delink them from parents’ labour market status. • Ensure that funding resources are distributed equitably among schools. • Provide additional support to students from lower socio-economic backgrounds. • Clarify fiscal federal relationships in the delivery of education services, simplify funding mechanisms and increase transparency in the allocation of resources at the state level. • Continue efforts to step up monitoring and evaluation at the subnational level. • Continue to expand VET coverage, assess the results of the internship programmes and encourage female participation.
49
More information‌ http://www.oecd.org/economy/surveys/mexico-economic-snapshot/
Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
OECD Economics OECD 50