Economic Growth Outlook for Mexico in 2024 and 2025
08:59 15/10/2024 - PesoMXN.com
The International Monetary Fund (IMF) announced on Tuesday that it expects Mexico's economic growth to moderate, reaching only 1.5% this year. This slowdown is attributed to constraints in productive capacity and a restrictive monetary policy. For next year, the projection is even lower, with a growth forecast of 1.3%, just as inflation approaches the 3% target set by the central bank.
It is anticipated that the continuation of monetary restrictions and a decrease in economic activity will help keep inflation within target for 2025. In September, Banxico decided to lower its benchmark interest rate to 10.50%, in a vote that produced divided opinions. However, the minutes from that meeting indicated that council members are confident that the decline in inflation will allow for further cuts. The IMF also warned that inflationary risks remain elevated due to potential factors such as weaker-than-expected growth in the United States, a rise in global risk aversion, and unexpected effects from recent reforms. In particular, the IMF criticized a new judicial reform that creates "significant uncertainties regarding the effectiveness of contract enforcement and the predictability of the rule of law." While the ruling party and its allies defend the reform, arguing it will reduce judicial corruption through the popular election of judges, this initiative has raised concerns among trading partners like the United States and Canada, along with protests from members of the judiciary. Additionally, Mexico's current account deficit is projected to rise slightly in 2024, as investment and consumer-related imports outpace exports. The IMF emphasizes that the country needs to implement a medium-term fiscal strategy to reduce the deficit and debt, increase revenues, and create space for investment in human and physical capital.
The situation facing the Mexican economy underscores the urgent need to strengthen fiscal and investment foundations. Creating a stable environment that fosters investor confidence will be crucial for sustaining long-term growth. Implementing policies that reduce legal uncertainty is vital for ensuring balanced development, allowing the country to effectively tackle imminent challenges.
