Introduction to the Current Economic Scenario in Mexico
According to a recent report by the National Institute of Statistics and Geography (Inegi), Mexico’s economy is projected to contract by 0.2% in November, following a slight recovery estimated for October. This marks the sixth consecutive month of decline since March, with previous monthly contractions being -0.2%, -0.1%, -0.4%, and -0.6%.
IOAE Forecasts Limited Growth and Declining Business Confidence
Strategists from Monex highlighted that the IOAE’s October and November forecasts predict limited growth towards the end of the year. Simultaneously, business confidence has fallen in manufacturing, construction, and retail sectors. The annual comparison by the IOAE estimates no variation from November 2024, indicating a transient uptick without clear signs of economic activity consolidation.
Sectoral Weaknesses
The Inegi report reveals that the monthly economic decline is attributed to weaknesses in both sectors evaluated by the IOAE: secondary activities (industries) and tertiary activities (services).
- Secondary activities are projected to decrease by 0.3% in November, while tertiary activities are expected to contract by 0.1%.
Monex strategists noted that these figures suggest a slowdown in major economic activity groups, particularly in manufacturing and to a lesser extent in tertiary activities.
Lower-than-Expected GDP Growth
Given the ongoing weakness in Mexico’s economy, expected to persist until year-end, the Gross Domestic Product (GDP) growth will be significantly lower than initial expectations for the year, falling below the federal government’s official projection.
Gabriela Siller, director of Economic and Financial Analysis at Banco Base, estimated that with recent data (January to November), Mexico’s monthly average economic growth is 0.09%. If this growth is applied to the final month of the year, the quarterly GDP would be 0.16%, and annual growth would be 0.22%.
“If this materializes, the 2025 annual GDP growth would be 0.44%,” Siller added.
This growth rate would be slightly below the federal government’s prediction, which estimates a range between 0.5% and 1.5% for the first year of Claudia Sheinbaum’s administration.
Government Projections and Recent Developments
In previous months, the Secretariat of Finance and Public Credit assured that the economy would recover towards the end of the year following the third-quarter decline. However, recent developments suggest a more cautious outlook.
“The overall economy continues to perform relatively well… We expect things to improve even further in the next quarter,” Rodrigo Mariscal Paredes, head of Economic Planning at Finance, had stated earlier.
The Citi Expectations Survey also projected a 0.4% growth for the end of this year and a 1.2% increase for the following year.
Gabriela Gutiérrez, president of the Mexican Employers’ Federation (IMEF), cited uncertainties surrounding trade agreement renegotiation, judicial reform effects, and the disappearance of autonomous bodies as primary reasons for low growth. Additionally, Mexico’s strong reliance on natural gas for electricity generation and industrial activity adds to growth and inflation pressure risks.
