The Mexican economy faces significant challenges in 2025, but also opportunities to attract more foreign investment and improve living standards.
Various factors, mostly transitory, will result in an economic slowdown in the country.
Growth and Fundamentals
The Mexican economy should expand by between 0.5% and 1% in 2025, with much resting on managing the deficit and government spending to ensure the sustainability of public finances.
The country’s political leaders will also have to negotiate a period of uncertainty on investment decisions as the new US administration settles in.
Still, it is anticipated that a series of structural changes in Mexico itself should ensure a gradual acceleration of growth in the next few years. The fundamentals of the economy are solid and include external accounts with reduced imbalances, a well-capitalized banking system, a moderate public debt-to-GDP ratio in comparative terms and an autonomous central bank clearly focused on combating inflation.
United States and Trade
The reconfiguration of global production chains initiated in recent years has been beneficial for the country. Since 2023, Mexico has become the main exporter to the United States, the world's largest consumer market.
The return to the White House of President Donald Trump, will bring new challenges for the Mexican economy, as it did in his previous term. However, the two countries share deep trade ties and Mexico will probably continue to benefit from the relocation of production facilities from other regions of the world to North America.
Inflation Nears the Target
In the central scenario, annual inflation will continue to decrease throughout 2025, at a slower rate than in 2024 but still approaching the central bank's target. This will allow further cuts in interest rates – and at a higher frequency than the reductions implemented by the Federal Reserve in the United States.
We expect private consumption to be the main driver of economic growth in 2025, with a resilient labour market benefiting from declining inflation and interest rate cuts. In the medium term, however, external demand and investment should be the main drivers supporting higher and more sustained economic growth.
