The Mexican economy is projected to expand by 5% in 2021 and 3.2% in 2022. Manufacturing exports will support growth benefiting from the strong recovery and policy support in the United States. Private consumption will strengthen gradually, aided by remittances and the rollout of vaccines. Inflation increased in the first half of 2021 due to a low-base effect and higher energy prices, but it is expected to edge down amid large spare capacity. Poverty, inequalities and gender gaps have widened again due to the pandemic.
Accelerating the vaccination campaign is crucial to reinvigorate the recovery. Greater income and training support would help the hardest-hit workers, both in the informal and formal sectors. Expanding access to childcare would facilitate female labour force participation. Bolstering private investment will be key for a stronger recovery, in particular by reducing regulatory burdens and uncertainty concerning private sector’s involvement in some key sectors. With inflation expectations well anchored, monetary policy easing would be appropriate if inflation edges down in the second half of 2021.