Mexico’s Growth Outlook Upgraded Amid Latin America Slowdown

Mexico’s Central Bank (Banxico) raised its 2025 growth forecast to 0.53%, while the World Bank warned that Latin America and the Caribbean will remain the slowest-growing region globally, with projected expansions of 2.3% in 2025 and 2.5% in 2026.

Banxico’s latest monthly survey of 45 national and foreign consulting groups marks the fourth consecutive upward revision for Mexico, up from 0.46% in August and 0.18% in May. Private-sector analysts also revised inflation expectations downward, projecting 3.85% for 2025, compared to 3.95% the previous month.

Deputy Governor Jonathan Heath said market expectations “reflect confidence in the central bank’s ability to guide inflation.” Banxico projects inflation will reach its 3% target by mid-2026, while survey participants expect it to remain above target until 2027, at 3.80% in 2026 and 3.71% in 2027.

The central bank’s benchmark interest rate currently stands at 7.50%, with analysts anticipating it will end the year at 7.14%, implying rate cuts of nearly 40 basis points across Banxico’s remaining meetings in November and December.

Despite the gradual easing of monetary policy, business sentiment remains cautious. About 81% of surveyed specialists said the economy is not better than a year ago,  improving from 89% in the previous survey. Sixteen percent expect conditions to worsen, 25% anticipate improvement, and 59% foresee no change. Regarding investment, 43% considered the environment unfavorable, 9% favorable, and 48% uncertain.

At the regional level, the World Bank projected modest growth across Latin America. Brazil’s expansion is expected to slow to 2.4% from 3.4% last year, while Mexico’s economy is forecast to grow 0.5% in 2025 and accelerate to 1.4% in 2026, slightly above the 0.2% projected in June.

“This reflects, in part, an external environment offering limited support, characterized by a cooling global economy, lower commodity prices, and greater uncertainty,” the World Bank said.

The report also noted that while monetary authorities in the region “continue managing inflation competently,” the “last mile” of disinflation has proven longer and more challenging than expected.

Susana Cordeiro Guerra, the newly appointed World Bank vice president for Latin America and the Caribbean, said that while governments “have guided their economies through repeated crises while preserving stability,” they must now “accelerate reforms.”

World Bank Chief Economist for the region William Maloney highlighted structural challenges, noting that roughly 70% of national economies rely on microbusinesses with limited growth potential. “In Latin America, we have about 30% of companies that say they want to grow but cannot due to a lack of skilled labor,” he said.

Maloney added that universities in the region “are not particularly productive in terms of new inventions” and “are not closely integrated with the private sector,” pointing out that Latin America “is tied with Africa in the degree of cooperation with private industry, and that simply cannot continue.”