Mexico’s Economy Contracts 0.3% in 3Q25, Mining, Energy Slide

Mexico’s economy contracted 0.3% year over year in 3Q25, according to preliminary data from the National Institute of Statistics and Geography (INEGI). If confirmed in the final GDP report on Nov. 21, it would mark the first annual decline in economic activity since 4Q21.

The slowdown was largely driven by a 2.9% drop in secondary activities, including manufacturing, construction, mining, and energy generation. The services and commerce sector, which accounts for the largest share of GDP, fell 0.9%, while agriculture grew 3%, insufficient to offset declines in industry and services, which together represent over 90% of total output.

On a quarterly basis, GDP also contracted 0.3%, reinforcing signs of weakening activity noted by Banxico since late 2024. “The decline in Q3 activity was already incorporated into our statistical model,” said Alberto Ramos, Goldman Sachs’ chief economist for Latin America. He maintained a 2025 growth forecast of 0.5%, citing domestic and external policy uncertainty, weaker business confidence, and fiscal consolidation efforts.

Inflation in the first half of October stood at 3.63%, slightly down from 3.78%, and remains within Banxico’s target range of 3% ±1 percentage point. Both core and non-core components of the National Consumer Price Index (INPC) showed signs of moderation.

The International Monetary Fund (IMF) projected Mexico’s economy will expand 1% in 2025 and 1.5% in 2026, returning to its long-term average growth rate above 2% by 2027. The slowdown is attributed to tight monetary and fiscal policies, tariff uncertainties, and the upcoming USMCA review.

The IMF emphasized that tariffs and trade uncertainty will continue to constrain growth and urged Mexico to address infrastructure bottlenecks, improve the business climate, strengthen judicial independence, and combat corruption and crime. Key recommendations include resolving trade tensions with the United States, deepening USMCA regional integration, avoiding trade-distorting measures, and diversifying partnerships with the EU and regional economies such as Brazil.