Mexico has suffered its most severe recession since the 1994 currency crisis. Real GDP fell by 9.7% year-on-year in the second quarter of 2009, reflecting lower oil prices and lower exports, the outbreak of influenza and declining tourism revenues and worker remittances. Supported by the rebound in oil prices and increasing exports to the Unites States, the fall in activity slowed down and activity is now starting to recover. As monetary and fiscal stimulus are gaining traction, the recession is projected to bottom out in the third quarter of 2009 and GDP growth should rise gradually in 2010. The central bank has reduced the policy rate from 8.25 to 4.5% since February 2009 and the government implemented a fiscal stimulus package amounting to around 1.6% of GDP. Going forward, the central bank will have littleroom for further monetary easing as inflation is projected to remain close to the upper bound of its inflation target range. The automatic fiscal stabilisers should be allowed to work freely in 2010, but the fiscal stimulus should be gradually withdrawn if the recovery takes hold as projected. Consolidation measures proposed by the government to contain revenue shortfalls are necessary to avoid adverse financial market reactions.

Mexico entered recession in late 2008, and growth had turned highly negative by the first quarter of 2009, as both exports and domestic demand contracted in the wake of the crisis. The outbreak of influenza and continued troubles for auto manufacturers are likely to have contributed further to the downturn.

Economic growth is set to fall well below potential in 2008 and 2009, before gradually recovering in 2010. The weak US economy and a fall in oil production will cut exports over the next several quarters, while the effects of the financial turmoil will depress domestic demand growth. Activity will recover through 2010 as global economic conditions improve. Inflation will return to near the target rate as commodity prices fall, activity slows and monetary tightening keeps expectations anchored, although the recent sharp depreciation of the peso will put upward pressure on prices.

Denmark is confirmed as the OECD’s highest-tax country, followed by Sweden, while Mexico and Turkey remain the lowest-taxing countries, the latest 2008 edition of Revenue Statistics says. Denmark’s tax-to-GDP ratio stood at 48.9% in 2007, while Turkey’s was at 23.7% of GDP.

Climate change is a pressing challenge, requiring leadership and determined action. At the same time, people are concerned that policies do not put them at an economic disadvantage or unnecessarily undermine their welfare.

Can governments balance these concerns? The OECD’s Environment Policy Committee meets at ministerial level on 28-29 April 2008 under the theme of global competitiveness. Some non-OECD developing countries will also participate, as will stakeholders from business, labour and civil society.

After a moderate slowdown in 2007, reflecting a weakening of external demand, GDP growth is expected to accelerate in the course of 2008 and reach 4.25% in 2009. The approval of the fiscal reform should boost business confidence, underpinning stronger domestic and foreign investment.

Mexico has made great economic strides over the past decade, and output growth is expected to reach 3.5-4% in 2008. However, the latest Economic Survey of Mexico says that only a renewed reform effort will raise the economy to a higher plane of growth and help close the gap with wealthier OECD countries.

Mexico’s economic performance has improved, but not by enough, according to the OECD Economic Survey of Mexico released late last year. Since the 1995 financial crisis, Mexico has made progress in terms of economic stability, and the economy is far more open, too. But while poverty has fallen, it remains widespread.