Mexico With Lowest Inflation Rate in Energy Prices: OECDBy María José Goytia | Wed, 05/11/2022 - 14:20
Rising inflation continues to rattle the international economy. Recent data published by the Organization for Economic Cooperation and Development (OECD) shows its member-states continue to grapple with the issue. However, because of strong government’s subsidies, Mexico performed as the country with the lowest energy inflation in March 2022 among the 38 members of the organization.
Mexico’s energy inflation totaled 5.3 percent, well below the OECD’s average, which stood at 33.7 percent.
In the monthly comparison, the more advanced economies showed the highest fluctuations in the energy segment. The country with the highest energy inflation was Turkey, with an increase of 120.9 percent. The countries that followed were the Netherlands, with an annual increase of 99.7 percent, Spain with 60.9 percent and the US with a 32 percent increase in energy prices.
President López Obrador explained that Mexico’s fossil fuel prices stand out compared to the rest of the world thanks to a policy he implemented. "We have been able to maintain inflation without excessive growth because we took the early decision to control fuel prices. This has allowed us to have lower inflation rates than the US, which is reflected in the energy environment," said the president.
The policy consists of stimuli the federal government is granting to gasoline and diesel so that they do not reflect international reference costs to consumers as harshly. Due to the war between Russia and Ukraine, crude oil prices have grown rather volatile. However, experts worry that the subsidies will have an impact on Mexico's public finances, costing around of MX$400 billion (US$19.6 billion), which is equivalent to 1.4 percent of the national GDP.
In other sectors such as food, Mexico has not been able to control inflation. The increase in food prices amounts to 13 percent annually, which places Mexico as the eighth country in the OECD with the highest inflation in this area. The average annual food inflation rate for OECD members was 10 percent during March.
Regarding general inflation, Mexico is among the countries with the highest rate, ranking 16th among OECD members with an annual increase of 7.5 percent. The member state with the highest inflation was Turkey, which recorded a surge of 61 percent, followed by Lithuania with a 15.7 percent annual variation. By contrast, Japan had the lowest inflation rate with 1.2 percent, followed by Switzerland with 2.4 percent. On average, OECD countries experience a generalized inflation rate of 8.8 percent. About one-fifth of OECD countries recorded double-digit inflation.