The Economic Scenario in 2025
As we approach the end of 2025, Mexico’s economy has been marked by low economic dynamism, amidst a complex national and international environment. Legal uncertainty stemming from the judicial reform has generated doubt, which is now reflected in low levels of investment in the country. Additionally, an international environment characterized by trade tensions and high tariffs, due to the United States’ trade policies, adds to the challenges. These policies affect not only Mexico but also its other trading partners.
Key Economic Indicators in 2025
Economic forecasts, both in Mexico and by international organizations, estimate meager growth by the end of 2025 and a slight recovery in 2026. However, these projections seem challenging given the increasingly strained public finances with limited room to maneuver for growth-promoting strategies.
- Intense political agenda in the first year of the current administration, including the formation of a new judicial structure and the elimination of autonomous bodies, leading to greater concentration of the ruling party’s members across all three branches of government, with subsequent economic repercussions.
- Investment and private consumption, which together account for 80% of Mexico’s GDP, have shown signs of weakness. Investment fell by 0.3% in September, while private consumption stagnated compared to the previous month, according to INEGI data.
- Annualized investment decline of 8.4%, with construction investment down by 10.2% and machinery and equipment investment down by 6.1%. Infrastructure investment also decreased by 29.1% from January to October 2025.
- Banxico’s latest estimates suggest a 0.3% growth by year-end, far from initial projections of 0.5% to 1.5%. Public finances add complexity, with billions of pesos allocated to Pemex and a high public debt level estimated at 53.1% of GDP by the end of 2025.
- Internationally, the US economy is expected to grow less (-2.0%) in 2025 compared to 2024’s 2.8%, mainly due to higher tariffs translating into increased prices that discourage household consumption and business investment.
Economic Outlook for 2026
Banxico’s November survey adjusted the PIB growth expectation downward from 0.5% to 0.39% for 2025’s end. For 2026, the expectation was also revised from 1.32% to 1.29%, down from the 1.75% estimated in January. The OECD similarly revised Mexico’s growth estimates to 0.7% for 2025 and 1.2% for 2026.
Positive Economic Variables
The OECD highlights several positive factors for Mexico’s economy, including low unemployment, moderated inflation, and declining interest rates that should boost consumption. However, it’s crucial to address the issue of seemingly optimistic employment figures, largely attributed to informal sector jobs.
- October 2025 saw an increase of 1,485,501 workers entering the informal sector compared to 455,586 formal job losses since October 2024. Consequently, the labor informality rate rose to 55.7% from 54.1% the previous year, indicating a significant deterioration in job quality.
Public Finance Concerns
The most worrying variable for analysts is public finances, as lower economic dynamism results in reduced tax collection. With limited room for public spending, committed mainly to pensions, social programs, and debt repayment, the government is projected to end with a fiscal deficit of 3.6% of GDP for 2025 and 2026, according to the OECD, without a fiscal reform.
Key Questions and Answers
- Q: What challenges does Mexico’s economy face in 2025? A: Mexico’s economy faces legal uncertainty, low investment, stagnant private consumption, and strained public finances due to high debt levels and limited fiscal space.
- Q: How does the international environment impact Mexico’s economy? A: The US’s aggressive trade policies with high tariffs negatively affect Mexico’s economic viability by discouraging consumption and investment.
- Q: What are the positive factors for Mexico’s economy in 2026? A: Positive factors include low unemployment, moderated inflation, and declining interest rates, which should boost consumption.
- Q: What are the concerns regarding public finances in Mexico? A: Concerns revolve around limited tax collection due to lower economic dynamism, constrained public spending, and the high public debt burden.
*José C. Femat is an economist with a postgraduate degree in history and economic development. Rodolfo Salazar is an economist with a postgraduate degree in administration and finance.
