Output growth is likely to moderate, reflecting weaker public spending and faltering external demand. But private investment and consumption should remain strong, and GDP growth is projected to reach 3.5 to 4% in 2007 and 2008. After turning up in the third quarter of 2006, inflation should come down. With the terms of trade deteriorating, the current account deficit should widen gradually.
Monetary policy is expected to ease in early 2007 once inflation has come down. With less growth and lower oil receipts, the environment for fiscal policy will become more difficult, but the fiscal position should not be allowed to weaken. A reform is needed to widen the tax base with a view to reducing distortions and financing essential spending programmes on a stable basis.
| Population (000s), 2005 | 105 300 |
| Area (000 sq km) | 1 996 |
| Currency | Peso |
| GDP (Billion USD), 2005 | 1 134.9 |
| Life expectancy at birth (Women, Men), 2004 | 77.6, 72.7 |
| Total labour force (000s), 2005 | 42 463 |
| Government type | Federal Republic |
| Indicators | % change unless otherwise indicated | ||
|---|---|---|---|
| 2006 | 2007 | 2008 | |
| GDP growth | 4.7 | 3.6 | 3.7 |
| Consumer price index | 3.6 | 3.6 | 3.2 |
| Unemployment rate (%) | 3.4 | 3.4 | 3.4 |
| Current account balance (% GDP) | -0.2 | -1.0 | -1.4 |
Source: OECD
©OECD Observer No. 258/259, December 2006
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