Market Anticipates Slight Uptick in GDP Growth
According to Citi’s weekly survey, the Mexican market expects the country’s economy to grow by 0.4% in terms of Gross Domestic Product (GDP) for this year. This projection represents an upward adjustment from the 0.3% anticipated at the beginning of the month but remains below the 1% hoped for at the start of the year.
Divergent Views on Economic Growth
Only two groups of economists, Valmex and Scotiabank, forecast a contraction in economic activity, estimating a 0.1% decline for the entire year. This contrasts with the 10 participants who considered the possibility of a contraction just a month ago, in Citi’s July 22 survey.
On the other hand, Santander stands out among the 35 financial groups surveyed for having the highest growth projection for this year, anticipating a 0.8% increase in GDP.
Inflation Projections
Experts consulted expect inflation to end the year at 4% annually, slightly below the 4.02% projected in the previous quinzena. Epicurus Investments has the highest inflation expectation, anticipating a fluctuation of 4.47% in the National Consumer Price Index (CPI).
Twenty-two of the 35 interviewed have inflation projections above 4%, while Signum Research expects inflation to end at 3.64%, slightly above Banco de México’s target of 3%.
Implications for Monetary Policy
The market consensus, as gathered by Citi, suggests that the Banco de México could apply an additional rate cut of 25 basis points, leaving the rate at 7.50% by year-end.
Outlook for 2026
The expected scenario for the following year includes a GDP growth projection of 1.4%, unchanged from the previous quinzena and far from the 1.8% anticipated at the beginning of the year.
Barclays has the highest growth projection at 2%, while Scotiabank estimates a mere 0.6%. The market consensus projects that inflation will vary by 3.70% at year-end, still distant from the target of 3% and not meeting the Banco de México’s median projection from the third quarter of the upcoming year.
Under these circumstances, the market consensus anticipates that Banco de México will have room to continue its accommodative cycle, leaving the rate at 6.75%. This would imply only three more rate cuts of 25 basis points each, or one of 50 basis points followed by another 25.
Key Questions and Answers
- Q: What is the current GDP growth expectation for Mexico in 2025? A: The market expects a 0.4% growth in Mexico’s GDP for 2025.
- Q: How do economists’ views on economic growth differ? A: While Santander projects a 0.8% growth, Valmex and Scotiabank forecast a 0.1% contraction.
- Q: What are the inflation projections for 2025? A: Inflation is expected to end the year at 4% annually, with Epicurus Investments anticipating a 4.47% fluctuation in the CPI.
- Q: How might monetary policy be affected by these projections? A: The market consensus suggests Banco de México could cut rates by an additional 25 basis points, leaving the rate at 7.50% by year-end.
- Q: What are the GDP growth and inflation projections for 2026? A: GDP growth is projected at 1.4%, with inflation expected to vary by 3.70% at year-end, still distant from the 3% target.
