Analysts forecast higher inflation, slower growth for Mexico in 2025

Private sector analysts in Mexico forecast a more difficult economic environment for 2025, with lower GDP growth and higher inflation, according to the most recent monthly survey by the central bank (Banxico).

For next year, the analysts predict that GDP will climb 1.78%, down from the 1.80% expected predicted in the previous survey, with inflation expected to reach 3.76%, slightly above last month's 3.71% outlook.

Although the private analysts trimmed their inflation expectations to 4.23% for this year from the previous 4.27%, they only expect the economy to grow 2.00%, instead of 2.10%.

The general factors that could hinder Mexico's economic growth in the next six months include governance (mentioned by 56% of respondents) and internal economic conditions (18%), according to the specialists consulted.

More specifically, they point to internal political uncertainty (18%), public insecurity problems (14%), other problems related to the lack of rule of law (10%), the absence of structural change in Mexico (8%) and corruption (8%). 

“A more difficult environment is expected in 2025, with higher inflation and lower economic growth,” economist Gabriela Siller, director of economic analysis at Grupo Financiero Base, said on social network X.

Meanwhile, the Banxico survey showed that analysts now expect the exchange rate to reach 18.73 pesos per dollar this year and the interest rate to end 2024 at 10.25%. They predict that the monetary authority will cut the benchmark rate by around 75 basis points in the second half of the year, while in May they expected a cut of up to one percentage point this year.

Last week, the central bank's governing board kept the interest rate at 11%, amid persistent inflation pressures and market uncertainty.

For next year, economic specialists predict an exchange rate of 19.36 pesos per dollar and a reference interest rate of 8.25%.

Siller highlighted that the Mexican peso began the second half of the year with significant depreciation against the dollar, due to the persistence of risks such as the high fiscal deficit, the economic slowdown and the possibility of constitutional reforms being approved by the new government.

During June, the Mexican peso was down 7.59% against the dollar, according to data from Investing.com, mainly due to the volatility in the local market after the June 2 election handed the governing Morena party a majority.