Background on Mexico’s Economic Situation
Mexico narrowly avoided a technical recession in the first quarter of 2025, as its real GDP grew by a modest 0.2% compared to the previous quarter, according to preliminary estimates from Mexico’s National Institute of Statistics and Geography (Inegi).
Market Expectations
Economists had anticipated a 0% growth rate for Mexico’s GDP on a quarterly basis during the initial months of 2025, according to a Reuters survey. Thus, the economic growth exceeded these expectations.
Divergent Analyst Projections
However, some analysts, like those at Citi México, had forecasted a decline in the Mexican economy for January-March, which would have resulted in two consecutive quarters of contraction and a technical recession.
Sectoral Performance
Primary (Agricultural) activities: Grew by 8.1% on a quarterly basis.
- Primary activities, which account for only 3.4% of the GDP and are prone to volatility, contributed to the growth.
Secondary (Industrial) activities: Declined by 0.3% on a quarterly basis.
- These activities, representing 33.4% of the GDP, face risks due to adjustments in international trade resulting from the United States’ tariff policies.
Tertiary (Service) activities: Remained stagnant with 0% variation on a quarterly basis.
- These activities, accounting for 63.3% of the GDP, experienced their first quarterly decline since 2021. This is linked to the labor market deterioration observed since 2024, which could worsen due to the uncertain business and household environment in Mexico.
Annual GDP Growth
On an annual basis, Mexico’s preliminary GDP estimate indicates a 0.6% growth rate, aligning with market expectations.
- Primary activities grew by 6% annually.
- Secondary activities contracted by 1.4% annually.
- Tertiary activities increased by 1.3% compared to the same quarter in the previous year.
Key Questions and Answers
- Q: What does it mean for Mexico to avoid a technical recession?
A: A technical recession is defined as two consecutive quarters of economic decline. Mexico narrowly avoided this by growing 0.2% in Q1 2025, thanks to the primary sector’s growth. - Q: How do different sectors contribute to Mexico’s GDP growth?
A: The primary sector, which includes agriculture and mining, grew by 8.1% in Q1 2025 but only accounts for 3.4% of the GDP. The secondary sector, representing 33.4% of the GDP, contracted by 0.3%. The tertiary sector, which accounts for 63.3% of the GDP, remained stagnant. - Q: What are the risks facing Mexico’s economy?
A: The secondary sector faces risks due to adjustments in international trade resulting from the United States’ tariff policies. The tertiary sector, which accounts for 63.3% of the GDP, has already experienced its first quarterly decline since 2021, linked to labor market deterioration.
