Mexico | The relevance of company size to economic growth

Summary

Once the country left behind the six-year economic crises of the 1980s and 1990s, a new era of macroeconomic stability took hold.

Key points

• Key points:
• During the period 1996-2008, the Mexican economy grew by an average of 3.1%. Growth accounting indicates that the contributions of capital, labor and total factor productivity (TFP) were 2.3, 1.1 and -0.3 percentage points, respectively.
• The Great Recession and Recovery spanned the period 2008-2019 and showed average economic growth of 1.5% with a contribution of -0.8 percentage points from TFP.
• In the post-pandemic period of 2020-2025, average economic growth will most likely be 1.1% with an expected contribution of -0.2 percentage points from TFP.
• Everything points to the decline in productivity of surviving firms as the main obstacle to TFP growth. There are structural distortions that reduce the effective size of firms, which is detrimental to productivity.
• The process of increasing investment and achieving positive TFP growth will require far-reaching reforms that gradually eliminate these distortions.

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