May 2, 2019 / 3:03 PM / 7 months ago

OECD sees Mexico's economy slipping this year, rebounding in 2020

MEXICO CITY (Reuters) - Economic growth in Mexico, Latin America’s second-largest economy, is seen dipping this year and then picking up steam in 2020, the Organisation for Economic Cooperation and Development (OECD) said in a report published on Thursday.

“Growth will strengthen moderately in the medium term. Investment will recover on the back of planned infrastructure projects complemented with institutions conducive to private investment,” the OECD said in its report.

Mexican President Andres Manuel Lopez Obrador, who took office in December, is aiming to boost the economy with the development of key infrastructure projects, such as the so-called Maya Train project in southern Mexico and a new oil refinery.

The OECD sees Mexico’s gross domestic product (GDP) expanding by 1.6 percent in 2019 and by 2.0 percent in 2020.

Mexico’s economy contracted in the first quarter of 2019 compared with the previous three-month period, preliminary data showed on April 30. GDP grew by 1.3 percent in the first quarter compared with the same period last year, according to unadjusted data.

Economic activity in early 2019 was impacted by disruptions in gasoline supply, strikes in northern and midwestern Mexico and railroad blockades that hit urban areas and supply chains.

“However, these effects are likely to have only a temporary effect on economic activity, and some planned production in the first quarter is likely to be shifted to the second quarter,” said the OECD.

Leftist Lopez Obrador has raised the minimum wage and cut taxes in cities and states along the U.S.-Mexico border in a bid to boost economic growth and deter migration to the United States.

“Domestic consumption will be supported by increases in the minimum wage, continued low unemployment and strong remittances,” said the OECD.

The OECD said its outlook is subject to “sizeable risks.”

Those include, difficulties in implementing investment plans to boost oil production, the challenge of effectively fighting crime and widespread corruption and the need to ratify a new regional trade deal meant to replace the North American Free Trade Agreement.

Reporting by Anthony Esposito; Editing by Andrea Ricci

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