Construction Sector Faces Flat Growth in 2025: BBVA

The construction sector in Mexico is expected to face stagnation in 2025, according to BBVA’s Real Estate Situation Mexico report for the 1H25. Despite growth of 2.7% in 2024, driven largely by the building subsector, BBVA anticipates slower activity this year due to a sharp decline in civil works and uncertainty surrounding future public infrastructure investments.

One of the main drags on the sector heading into 2025 is the civil works subsector, which contracted by 8.7% in 2024 and is expected to remain subdued. This is due to the completion of large-scale projects under the previous administration and real-term cuts of over 20% in federal infrastructure spending. Without a defined national infrastructure plan in place, civil works are unlikely to recover in the short term.

The building subsector — which includes housing, commercial, and industrial development — grew 6.9% in 2024 and now represents 70% of the sector’s GDP. However, BBVA warns that this strong performance may lose momentum in 2025. Industrial construction, which was previously boosted by nearshoring, is expected to moderate due to softer demand. Additionally, uncertainty around housing policies may dampen residential development.

Public investment in construction fell by over 18% in 2024, while private construction investment grew by 7.2%. This imbalance is expected to persist in 2025, with private capital shouldering more of the sector’s activity. This may not be enough to offset the public sector slowdown, especially in infrastructure-heavy regions, warns BBVA.

Although the Bank of Mexico (Banxico) cut interest rates by 100 basis points in 2H24, credit to the construction sector contracted by 3.4%. BBVA notes that despite cheaper financing, uncertainty in the market continues to limit credit growth. In 2025, housing developers may continue to see some credit expansion, but overall credit demand remains weak.

Construction material prices stabilized in late 2024 with inflation closing at around 3%. However, international tariffs and trade disruptions could impact the sector in 2025, reports BBVA. Any rise in input costs, especially in imported materials, could pressure margins and delay projects.

The sector shed 2.5% of its workforce by the end of 2024, particularly in states tied to major infrastructure projects. In 2025, job losses may continue if no new large-scale developments are launched to absorb displaced labor, says BBVA.