Introduction to the Current Economic Situation in Mexico
Following the COVID-19 crisis, Mexico’s economy entered a recovery phase in 2023 and 2024. However, towards the end of last year and especially in the first quarter of 2025, Mexico’s economic dynamics have started to decelerate. The pace of economic activity has recorded a 1.3% decline over the past nine months, according to INEGI data, largely due to a general contraction in the domestic market.
Demand-Side Analysis
On the demand side, private consumption has shown a 1.4% annual decrease compared to March 2024 and a 0.5% monthly decline relative to February 2025. The most significant contraction was observed in the consumption of final domestic goods (-1%) and imported intermediate goods (-6.1%). Consequently, the demand for goods and services is causing a typical contraction in supply.
- Private Consumption: Declined by 1.4% annually compared to March 2024 and 0.5% monthly compared to February 2025.
- Final Domestic Goods:
- Imported Intermediate Goods:
Experienced a 1% contraction.
Declined by 6.1%.
Investment Analysis
Given the significant drop in investment, it is expected that production will adjust similarly in upcoming months, negatively impacting the country’s economic growth rate. A decline in production could affect the income of economic agents, further reducing private consumption and dampening future investment expectations in a vicious cycle that can only be broken by government economic policy.
- Gross Fixed Capital Formation: Fell by 4.7% annually compared to March 2024.
- Construction (Non-Residential):
- Imported Transport Equipment:
- Domestic Transport Equipment:
- Machinery and Other Producive Capital Imports:
Experienced a -17.1% contraction.
Declined by -14.8%.
Decreased by -10%.
Fell by -7.7%.
Policy Responses and Future Outlook
Currently, monetary policy is sending anti-cyclical signals to revitalize the domestic market, but the interest rate remains high to achieve this goal. Fiscal policy has yet to show any significant movement, as stimuli to the productive apparatus are minimal and have low impact. It is hoped that market signals will soon react to reactivate the domestic market and regain or even surpass the growth rate displayed in 2023.
Key Questions and Answers
- What is the current economic situation in Mexico? Mexico’s economy has started to decelerate since late 2024, with a 1.3% decline in economic activity over the past nine months due to a contraction in the domestic market.
- How has private consumption been affected? Private consumption has decreased by 1.4% annually compared to March 2024 and 0.5% monthly compared to February 2025.
- What is the status of investments in Mexico? Investments have fallen significantly, with Gross Fixed Capital Formation decreasing by 4.7% annually compared to March 2024. Key sectors experiencing contractions include construction, transport equipment, and machinery imports.
- What are the policy responses to the economic slowdown? Monetary policy is sending anti-cyclical signals, but interest rates remain high. Fiscal policy has shown minimal movement, with limited stimuli to the productive apparatus.
- What is the outlook for Mexico’s economic growth? The hope is that market signals will soon react to reactivate the domestic market and regain or surpass the growth rate displayed in 2023.
The author is Vice Dean at the School of Economic and Business Sciences, Universidad Panamericana.
