Background on the Mexican Economy and Key Players
The Bank of Mexico (Banxico) recently released its April survey on private sector expectations for the Mexican economy. This survey indicates that experts have once again reduced their growth projection for Mexico’s GDP in 2025, from 0.50% in March to a revised estimate of 0.20%. This downward revision reflects growing uncertainty in the global economy, largely due to the trade policies of U.S. President Donald Trump.
Key Changes in the April Banxico Survey
- The 2025 GDP growth projection for Mexico has been cut from 0.50% to 0.20%
- Experts now see a higher probability (41% vs. 33%) of the Mexican economy contracting in Q2 2025
- The GDP growth projection for 2026 has also been reduced from 1.60% to 1.50%
Inflation Expectations Rise
Alongside the lowered GDP growth projections, experts have slightly increased their inflation expectations for Mexico by the end of 2025. The revised estimate is now at 3.90% compared to the previous 3.80%. The subjacent inflation (excluding volatile items like food and energy) is projected to close the year at 3.90%, up from 3.76% in the previous survey.
For 2026, inflation expectations remain relatively stable at 3.74%, and for 2027, they are projected to be 3.72%. Despite the higher inflation outlook, experts have revised their projection for Banxico’s reference rate downward to 7.75% by the end of 2025, from 8.00% previously.
In terms of interest rates, experts predict the interbank lending rate will close 2026 at 7.00%, down from the 7.50% projected in March.
Regarding exchange rates, experts expect the US dollar to be sold at 20.81 Mexican pesos by the end of 2026, a one-centavo increase from the previous survey.
Impact of Policy Uncertainty
The recent downward revisions in growth projections and inflation expectations reflect the ongoing uncertainty caused by U.S. President Donald Trump’s trade policies, which have created ripples in both the Mexican and global economies. This policy uncertainty has prompted experts to adjust their forecasts, highlighting the interconnected nature of international economies.
Key Questions and Answers
- What is the main reason for the revised GDP growth projections? The primary cause is policy uncertainty stemming from U.S. President Donald Trump’s trade policies.
- What are the new inflation expectations for Mexico by the end of 2025? Inflation is now projected to close at 3.90%.
- How have experts adjusted their projections for Banxico’s reference rate? The reference rate has been revised downward to 7.75% by the end of 2025.
- What is the expected exchange rate for the US dollar to Mexican peso by the end of 2026? Experts predict the US dollar will be sold at 20.81 Mexican pesos by the end of 2026.
