IMF cuts growth forecast for Mexico

The IMF cut its growth forecast for Mexico for this year and next, citing the economic slowdown that began in the last quarter of 2023 and the fiscal belt-tightening expected by the next administration that takes office in October.

Specifically, the IMF anticipates growth of 2.4% in 2024, supported by greater public spending, but below the 2.7% previously forecast. In 2025, the economy will expand 1.4% rather than the 1.5% estimated in January.

“The forecast for Mexico is revised downward on account of weaker-than-expected outcomes for end-2023 and early 2024, with a contraction in manufacturing,” the IMF said in its latest World Economic Outlook report.

See the full report in the Documents box in the top right corner.

The signs of weakness that the Mexican economy has shown at the beginning of 2024, despite it being an election year, have led to lower growth expectations among analysts. Elections are slated for June 2.

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Although public spending traditionally increases in presidential election years, especially in the first half, which boosts the economy, deceleration and lower consumption were observed in early 2024, gross fixed investment stagnated and exports fell.

The IMF's reduction comes despite improved growth expectations for the US, Mexico's biggest trade partner. 

“In the United States, growth is projected to increase to 2.7% in 2024, before slowing to 1.9% in 2025, as gradual fiscal tightening and a softening in labor markets slow aggregate demand,” the report said.

In January, the IMF projected 2.1% growth for the US. It added that the upward revision largely reflects statistical effects of stronger-than-expected growth in 4Q23, with a strong push into 2024.

In Latin America and the Caribbean, the IMF projects that growth will decline from 2.3% estimated for 2023 to 2.0% in 2024 and rise to 2.5% in 2025, for an upward revision of 0.1 percentage points for this year.

In Brazil, growth is expected to moderate to 2.2% in 2024 from 2.9% in 2023 due to fiscal consolidation, lagged effects of still tight monetary policy and lower contributions from agriculture.

According to the IMF's baseline forecast, the world economy will grow 3.2% in 2024 and 2025, at the same pace as in 2023.

A slight acceleration in advanced economies – from 1.6% in 2023 to 1.7% in 2024 and 1.8% in 2025 – will be offset by a slight slowdown in emerging and developing economies, from 4.3% in 2023 to 4.2% in 2024 and 2025.