Mexico Economic Outlook. June 2025

Summary

Economic activity is deteriorating due to heightened uncertainty; tariffs are affecting an economy already weakened by judicial reform and fiscal consolidation. We forecast GDP to contract by (-)0.4% in 2025, with a recovery expected in 2026 (1.2%).

Key points

• Key points:
• Consumption will continue to weaken due to the slowdown in real wage growth; investment is not recovering following cuts in public spending amid heightened uncertainty.
• Slower economic growth and low investment continue to hinder formal job creation; this trend is expected to persist, with an estimated decline of (-)0.1% by the end of 2025.
• Amid economic weakening, service inflation is expected to ease and Banxico to continue cutting its benchmark rate, while the Fed maintains its monetary policy stance unchanged.
• Long-term interest rates will continue to respond to the rate-cutting cycle, although their decline will be gradual due to the persistence of domestic and global risk factors.
• We anticipate the Historical Balance of Public Sector Borrowing Requirements will be 53.1% by the end of 2025 vs. 51.4% of GDP in 2024.

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