Mexico’s Treasury Department has released a statement that it would not be able to keep pace with the earlier forecast of economic growth. Last Wednesday, it slashed the 2008 economic growth outlook from 3.7 to 2.8 percent. Close to 25% drop is due to the recession fears in the US economy and it should not be forgotten that 50% of Mexico’s exports is directed to the US markets. The department further pointed out that Mexico’s GDP would have grown by 3.2% last year if there was not any slow down in the US.
The effective Free Trade Agreement with the US had boosted the Mexican economy to a great extent. Mexico is the only country in the Latin American region which is so much exposed to the US markets. Hence any downturn in the US could upset the applecart of Mexicans. There would be a domino effect in the job markets too, if one goes by the announcement of Banco de Mexico. The bank predicts the expected requirement of 756,000 jobs would be down to 620,000 in the present economic conditions. The country’s second largest source of income after oil has increased marginally by 1 percent last year compared with $23.9 billion of 2006. The slow down in the US would further bring down those figures in 2008.
As an inward solution, Mexico could find solace in the form of the proposed public-private infrastructure project worth billions of dollars which is promised by the President Felipe Calderon. Annually the government is expected to spend $39 billion over a period spanning 6 years to develop roads, bridges, seaports, dams and oil installations. Besides, plans are afoot to improve tourism, and credit lending programs to strengthen the housing industry. Although the country can boast of being the fastest growing nation in the region, 2008 would be the most defining year as far as its exports are concerned. Perhaps, the slower growth is a blessing in disguise for the Mexican economy because the country has started making serious attempts to diversify its exports.