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.