Banxico Cuts 2025 Growth Forecast to 0.1% Amid Economic Woes

Mexico’s Central Bank (Banxico) has lowered its 2025 economic growth forecast to 0.1%, down from an earlier estimate of 0.6%, citing a weakening economy and external challenges, Governor Victoria Rodríguez Ceja announced on Wednesday.

Presenting the bank’s quarterly report for the January–March period, Rodríguez Ceja outlined a revised GDP growth range for 2025 of -0.5% to 0.7%, a significant downgrade from the previous range of -0.2% to 1.4%.

Deputy Governor Gabriel Cuadra explained that the revision reflects near-zero growth expectations and a downward risk bias. “While the Mexican economy showed resilience in 2023 and 2024, we now project stagnation for 2025,” he said.

The primary driver of the downgrade is an anticipated slowdown in U.S. economic activity, particularly in the industrial sector, which is closely linked to Mexico’s performance. Cuadra noted that recent US trade policies could dampen domestic demand, reduce industrial output, and subsequently moderate Mexico’s economic growth.

Banxico also lowered its 2026 GDP growth forecast to 0.9%, down from 1.8%.

Rodríguez Ceja emphasized the importance of exchange rate flexibility to absorb external shocks and facilitate orderly economic adjustments. She highlighted the need to strengthen the rule of law, promote market competition, increase investment, and enhance productivity to support sustainable growth.

The report identified uncertainty as a significant factor affecting investment decisions and the overall business environment. It underscored the importance of maintaining sound macroeconomic fundamentals, including fiscal discipline, sustainable external accounts, and a well-regulated financial system.

Deputy Governor Jonathan Heath addressed rising inflation, noting that it had exceeded the central bank’s target range in May. Core inflation, which had eased late last year, has been gradually increasing and is expected to surpass 4% in May.

Banamex analysts predict a 50-basis-point rate cut in June, with rates potentially falling to 7% by year-end. However, they warned that a sharper economic slowdown could prompt Banxico to adopt more aggressive rate reductions.