Mexico’s Growth to Stay Weak Into 2025, Warn IMF, Citi

Mexico’s economic growth is expected to remain subdued in the short to medium term, according to projections from the International Monetary Fund (IMF), Citi, and national analysts. Weighed down by weak domestic demand, trade uncertainty, and persistent inflation, forecasts for 2024 and 2025 remain significantly below historical averages, with only a limited recovery expected in 2026.

The IMF recently revised its forecast for Mexico’s gross domestic product (GDP), now projecting just 0.2% growth in 2024—an upward revision from the -0.3% contraction forecast in April, but still indicative of stagnation. “We expect a stagnation in economic activity,” said Petya Koeva, deputy director of economic research, IMF. “Last year, growth was 1.4%; this year we expect 0.2%, and for next year we expect 1.4%.”

The IMF attributed the slight improvement to stronger-than-expected economic data and the limited impact of new trade tariffs. “A broad proportion of products remain exempt from tariffs due to rules of origin under the trade agreement,” Koeva noted. “This has helped mitigate uncertainty.”

INEGI, Mexico’s national statistics agency, is expected to release official second-quarter GDP data shortly. A Reuters poll of 13 analysts anticipates seasonally adjusted GDP growth of 0.4% in 2Q24, up from 0.2% in the previous quarter. Analysts pointed to industrial activity—particularly in construction—and the resilience of the services sector as offsetting continued weakness in agriculture. However, unadjusted annual growth is forecast at just 0.2%, the slowest pace since early 2021.

Citi’s July biweekly survey of 37 financial institutions projects just 0.2% GDP growth for 2025, in line with IMF estimates. This represents a sharp downgrade from the 1% forecast at the beginning of the year. Ten institutions—including BBVA, BofA, BNP Paribas, and Scotiabank Mexico—now expect the economy to contract in 2025. Scotiabank and Masari offered the lowest forecasts at -0.5%, while Barclays remained the most optimistic with a 0.7% projection.

Banamex recently revised its 2025 forecast upward to 0.4%, citing flat performance in May’s Global Indicator of Economic Activity (IGAE), which now supports a revised estimate for quarterly growth.

The inflation outlook also poses challenges. Citi’s survey pegs year-end 2025 inflation at 4%, with a range between 3.5% and 4.6%, exceeding the Bank of Mexico’s (Banxico) 3% target. As a result, Banxico is expected to begin easing monetary policy. The benchmark interest rate could drop to 7.50% by the end of 2025, with an initial 25-basis-point cut anticipated in August.

For 2026, GDP growth is forecast at 1.2%, slightly down from 1.3% in the previous survey and well below the 1.8% projection earlier this year. Barclays again leads with a 2% forecast, while BNP Paribas projects just 0.2%. Three institutions—Thorne & Associates, BNP Paribas, and Scotiabank—expect zero growth. Inflation is expected to end 2026 at 3.8%, still above Banxico’s target. The benchmark interest rate could fall to 6.75% by year-end.

The IMF also raised its global growth forecast to 3%, up from 2.8%, driven by better-than-expected performance in major economies. For the United States—Mexico’s main trading partner—GDP growth was revised upward to 1.9% in 2024 and 2.0% in 2025. However, the IMF warned that new tariffs could heighten inflationary pressures in the United States while acting as a demand shock for other economies, including Mexico.