Background on Mexico’s Economic Situation
The International Monetary Fund (IMF) announced on Friday that Mexico’s economy is expected to slow down in 2025, growing by a mere 1%, but is projected to regain momentum in 2026 with a GDP growth rate of 1.5%.
Mexico’s economy expanded by 1.2% in the previous year, and the IMF had projected a contraction of -0.3% for 2025, due to tariffs announced by then-US President Donald Trump.
Key Factors Affecting Mexico’s Economy
According to an IMF mission that visited Mexico at the end of August, the following factors have contributed to the slowdown:
- Fiscal consolidation: The process of reducing government spending and increasing taxes has negatively impacted consumption and investment.
- Restrictive monetary policy: The central bank’s efforts to control inflation have kept interest rates high, discouraging borrowing and investment.
- Trade tensions with the US: Ongoing trade disputes have created uncertainty and reduced both domestic and foreign investment.
The IMF mission also noted a slight growth acceleration in 2026, but the tariff effects and trade uncertainty will still be felt.
Recommendations for Mexico’s Economic Recovery
The IMF mission emphasized that Mexico needs greater fiscal adjustments and supportive policy measures to avoid further public debt increases and create room for responding to potential economic shocks.
They also suggested that monetary easing should continue once inflation is on track towards the Bank of Mexico’s 3% target.
Furthermore, the mission highlighted that Mexico’s long-term economic success depends on closing infrastructure gaps, strengthening the rule of law, and deepening integration with global trading partners.
IMF Mission Details
A delegation led by Mr. Gustavo Adler visited Mexico from August 18 to 29 and held virtual meetings from September 2 to 12 for the Article IV consultation of 2025.
Key Questions and Answers
- What is the IMF’s current GDP growth estimate for Mexico in 2025? The IMF has revised its estimate for Mexico’s GDP growth to 1% in 2025.
- Why did the IMF lower its previous growth projection for Mexico? The IMF had initially projected a -0.3% contraction for 2025 due to tariffs announced by then-US President Donald Trump, fiscal consolidation, restrictive monetary policy, and trade tensions with the US.
- What factors will contribute to Mexico’s economic recovery in 2026? The IMF mission expects a slight growth acceleration in 2026, supported by continued monetary easing once inflation is on track towards the Bank of Mexico’s 3% target, as well as greater fiscal adjustments and improved integration with global trading partners.
- What role does infrastructure, rule of law, and global integration play in Mexico’s long-term economic success? According to the IMF mission, closing infrastructure gaps, strengthening the rule of law, and deepening integration with global trading partners are crucial for Mexico’s long-term economic success.
