IMF Flags Modest Growth, Fiscal Pressures in Mexico for 2025

The IMF has just completed its 2025 Article IV consultation with Mexico. Results paint a picture of strength in fundamentals but softness in near-term growth, coupled with a number of policy challenges that the Mexican authorities face going forward.

After expanding by about 1.5% in 2024, Mexico’s real‐GDP growth is projected to fall to 1.0% in 2025. The factors behind the softness: the need for fiscal consolidation, restrictive monetary policy, and trade uncertainty which is weighing on investment and consumption. Looking ahead, the IMF expects growth to rebound to around 1.5% in 2026. Headline inflation is moderating, and the IMF expects it to converge toward the target set by the country’s central bank of around 3% by the second half of 2026.

Fiscal and Monetary Policy

The IMF signals that fiscal policy needs to become more ambitious in its consolidation path. The gross public‐sector debt is projected to reach 58.9% of GDP by end-year 2025. Although the 2024 fiscal expansion is expected to be reversed, the IMF warns that unless the trajectory is improved, debt will continue to rise in the medium term.

On the monetary side, Banco de México has already cut interest rates by 375 basis points since early 2024, aligned with the decline in inflation. The IMF advises that further monetary easing would be appropriate once there is clearer evidence that inflation is on a sustained path toward target. It also underscores the importance of refining communications to anchor inflation expectations and preserve credibility.

Financial and External Position

The financial system remains sound and resilient, with strong capital and liquidity positions. Mexico holds adequate external buffers and its external position is broadly in line with fundamentals. Furthermore, a near‐term strengthening of the current account is expected (due to weak domestic demand) but this is likely to unwind over time, and remittances are expected to gradually decline.

Structural, Supply‐Side Issues

The IMF notes that Mexico’s growth outlook remains moderate and highlights several ongoing structural and supply-side challenges. Key issues identified include:

• Infrastructure gaps that need closing;

• Business climate, rule of law, corruption and crime: The IMF says strengthening judicial independence and tackling corruption/crime are important to unlock stronger growth;

• Integration with global trade: Open trade remains a key engine for growth; policy support for sectors must be well targeted and must avoid creating barriers to trade/investment;

• Tax and state-owned enterprise (SOE) reform: The IMF suggests consolidation should emphasise revenue mobilization (improved tax administration and policy changes) and improving the financial health of SOEs, especially the major energy company PEMEX;

• Financial inclusion and AML/CFT: While progress has been made in anti‐money-laundering/counter‐financing efforts, the IMF says more must be done in inter-agency coordination and risk‐based supervision.  

Key Takeaways & Risks

IMF’s Executive Board notes Mexico’s strong track record of policy frameworks and resilience amid global uncertainties. The slower growth and remaining risks mean Mexico cannot be complacent. The main takeaway: maintain macroeconomic discipline and push forward structural reforms if the medium‐term potential of the economy is to be realised.

Risks to watch:

• A drift upward in public debt if consolidation stalls

• External shocks (trade disruptions, global slowdowns) given Mexico’s trade openness

• Inflation not converging as expected, undermining monetary policy credibility

• Supply‐side constraints continuing to limit growth, meaning the economy could persist in a low‐growth trap.