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IMF Country Report No. 17/129
MEXICO
REVIEW UNDER THE FLEXIBLE CREDIT LINE—PRESS RELEASE; STAFF REPORT
May 2017
In the context of the Review Under the Flexible Credit Line, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on May 22, 2017, following discussions that ended on April 7, 2017, with the officials of Mexico on economic developments and policies underpinning the IMF arrangement under the Flexible Credit Line. Based on information available at the time of these discussions, the staff report was completed on May 4, 2017.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2017 International Monetary Fund
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MEXICO
REVIEW UNDER THE FLEXIBLE CREDIT LINE ARRANGEMENT
May 4, 2017
Executive Summary
Context: Mexico’s very strong policies and policy frameworks have helped it navigate successfully a complex external environment characterized by the heightened risk of protectionism and financial market volatility. The increased uncertainty is likely to weigh on investment and growth. Inflation is above the central bank’s target, reflecting mainly the transitory effects of the liberalization of domestic fuel prices and the pass-through from the currency depreciation. Although the global environment and financial stability have improved somewhat recently, downside risks affecting Mexico remain elevated amid continued uncertainty about the outcome of the discussions with the United States on trade, as well as a possible renewed surge in capital flow volatility.
Policies: In recent years, macroeconomic policies have focused on strengthening fundamentals and safeguarding financial stability. The authorities have adhered to their fiscal consolidation plan designed to gradually reduce public debt in relation to GDP. The monetary tightening over the past year helped keep medium- and long-term inflation expectations well anchored. Continued steady implementation of the structural reform agenda, including further progress in strengthening the rule of law, and anti-corruption measures, would boost the economy’s growth potential.
Flexible Credit Line (FCL): On May 27, 2016, the Executive Board approved a 24-month arrangement with Mexico under the FCL in the amount of SDR 62.3889 billion (700 percent of quota, about US$85 billion). The authorities intend to continue treating the arrangement as precautionary.
Qualification: Mexico continues to meet the qualification criteria for access to FCL resources specified under the Executive Board decision on FCL arrangements (Decision No. 14283-(09/29), adopted on March 24, 2009, as amended). Therefore, staff recommends that the Board completes the review under the FCL arrangement which would allow Mexico to make purchases until the expiration of the arrangement on May 26, 2018.
Approved By
Robert Rennhack (WHD) and Tamim Bayoumi (SPR)
This report was prepared by a team comprising Costas Christou, Frederic Lambert, Damien Puy, Fabian Valencia (all WHD), Julian Chow (MCM), Charlotte Lundgren (SPR), and Florian Misch (FAD). Daniela Muhaj and Misael Galdamez provided excellent assistance.
Contents
CONTEXT
RECENT ECONOMIC DEVELOPMENTS AND POLICIES
OUTLOOK AND RISKS
THE FLEXIBLE CREDIT LINE AND REVIEW OF QUALIFICATION
SAFEGUARDS ASSESSMENT
STAFF APPRAISAL
BOXES
1. Trade and Financial Linkages Between Mexico and the United States
2. The Updated External Economic Stress Index
FIGURES
1. Evolution of Selected Financial Market Indicators
2. Real Sector
3. Labor Market Indicators
4. Prices and Inflation
5. Financial Sector
6. Fiscal Sector
7. External Sector
8. Reserve Coverage in an International Perspective, 2016
9. Nonfinancial Corporate Sector
10. Banking System
11. Qualification Criteria
TABLES
1. Selected Economic, Financial, and Social Indicators
2. Statement of Operations of the Public Sector, Authorities’ Presentation
3. Statement of Operations of the Public Sector, GFSM 2001 Presentation
4. Summary Balance of Payments
5. Financial Soundness Indicators
6. Financial Indicators and Measures of External Vulnerabilities
7. Baseline Medium-Term Projections
8. Capacity to Repay Indicators
APPENDICES
I. External Debt Sustainability Analysis
II. Public Debt Sustainability Analysis
Front Matter Page
Press Release No. 17/189
FOR IMMEDIATE RELEASE
May 23, 2017
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