Economic Challenges and Perspectives for Mexico in 2025

The arrival of new administrations in Mexico and the United States, coupled with ongoing military conflicts in Ukraine and the Middle East, are factors that will influence economic performance in 2025. These elements create significant uncertainty for both the national and global economies, as every political or economic decision can trigger considerable repercussions.

Are we on the brink of a recession? How will inflation behave? What will happen to the value of the Mexican peso? What challenges will public finances face? What can we expect from the Federal Reserve of the United States?

Ricardo Aguilar Abe, Chief Economist and Director of Analysis at Banco INVEX asserts that despite a slight cooling in domestic demand, positive growth is expected for Mexico in 2025, approximately 1.0%. This is due to the strength of the services sector and a potential increase in public spending. However, the risks to this projection are biased to the downside, as investment may be affected by internal reforms or changes in U.S. policies favoring investment in the North.

Enrique Covarrubias, Chief Economist and Director of Analysis at Grupo Financiero Actinver points out that a recession is not anticipated despite an increase in its likelihood. In 2025, he expects economic activity to continue growing, albeit slowly, in line with global growth projections from the IMF. This may lead to a slight deceleration in manufacturing production and exports, while robust consumption could be supported by social transfer programs bolstering the local economy, estimating GDP growth between 1% and 1.5%. Alejandra Marcos, Director of Analysis and Strategy at Intercam Banco mentions that although inflation might continue its downward trend, the path will be limited. Even though the economic slowdown could help inflation converge toward the Banco de México's targets, care must be taken with inflation in services, which has remained above 5%. It is estimated that overall inflation could be around 3.9% and the core component at 3.7% in 2025. Alejandro Saldaña, Chief Economist at Grupo Financiero BX+ adds that low economic growth could help contain inflation, although it is not expected to reach the 3% annual target in the short term. Wage pressures in the country may continue to complicate the situation, especially if the government continues promoting significant increases in the minimum wage. Alejandra Marcos, Director of Analysis and Strategy at Intercam Banco, also considers the exchange rate to be a critical barometer in uncertain times. As the end of 2025 approaches, there could be volatility due to the renegotiation of the sunset clause in the USMCA. As long as there are no tariff threats, it is expected that the exchange rate could stabilize between 20 and 20.50 pesos per dollar. Nadia Montes de Oca, Senior Portfolio Manager at Franklin Templeton Mexico, indicates that the depreciation of the peso has been notable, and while the political landscape in the U.S. might stabilize, uncertainty will remain, potentially driving the exchange rate to around 20.30 pesos per dollar by the end of 2025. Víctor Ceja, Chief Economist at Valmex Casa de Bolsa, highlights that fiscal consolidation will be one of the main challenges, aiming to reduce the fiscal deficit from 6% of GDP in 2024 to half of that in 2025. This will be difficult without a fiscal reform that increases revenues. Gabriel Casillas, Chief Economist for Latin America at Barclays, also mentions that credibility, growth, and the situation of Pemex are the primary challenges facing public finances. The government will need to present a credible economic package to generate trust in the markets. Ricardo Aguilar Abe, Chief Economist and Director of Analysis at Banco INVEX warns that the recent interest rate cut may have been too aggressive, as the Fed typically makes such moves in a crisis context. Iván Arias Gallegos, Director of Economic Studies at Citibanamex, concludes that we need to be attentive to signals from the labor market and consumer spending, as a slowdown in these areas could negatively influence economic growth.

The challenges for the global economy include rising inflation, stabilization of public debt, and the management of appropriate monetary policies. It is essential to gradually reduce interest rates without harming growth. The year 2025 will be a decisive one for laying the foundations for a more robust and sustainable economy in the future.

Conclusion: Mexico's economy faces uncertainty that could influence its performance. Political decisions, both internal and external, will play a crucial role in growth and the potential stability of the peso. The focus should be on fostering a confidence-building environment for investment and improving inflation indicators, which will in turn help strengthen public finances and ensure sustained growth.