Lower inflation but a more expensive dollar expected at the end of the year in Mexico

Private sector analysts in Mexico predict that inflation will edge down by the end of this year but also believe that the dollar will rise against the peso, according to the monthly survey conducted by Mexico's central bank (Banxico).

In the November survey of 40 national and international private-sector economic analysis and consultancy groups, the forecast inflation rate for end-December was trimmed slightly to 4.42% from the average estimate of 4.45% made in October. However, the exchange rate is now projected to close at 20.29 pesos per dollar, compared with 19.80 pesos previously.

Banxico’s inflation target is 3% ± one percentage point.

The analysts' GDP growth projection was revised upward, from 1.40% to 1.53% for this year and from 1.17% to 1.20% in 2025. However, this still suggests an economic slowdown.

Among the factors potentially hindering Mexico’s economic growth, analysts identified governance issues (56%), external conditions (18%) and domestic economic conditions (16%) as the main concerns.

Specifically, the top factors cited were public insecurity (18% of responses), internal political uncertainty (15%), other issues related to the lack of the rule of law (13%), trade policy (8%) and impunity (7%).

The issues rated as most concerning in the survey included public insecurity, lack of rule of law, corruption, impunity, internal political uncertainty, the absence of structural change in Mexico, uncertainty regarding the domestic economic situation and lack of market competition.

Lastly, the sectors identified as having the greatest lack of competition were electricity, energy, telecommunications and internet services.

Last week, Banxico made an upward revision to its annual growth forecast, lifting it to 1.8% from 1.5% in the previous quarterly report. It explained that “after three quarters of marked economic weakness, a higher GDP growth rate was observed in the third quarter of 2024.”

For 2025, the GDP growth forecast was left unchanged at 1.2%. The central bank noted that the forecasts for 2025 “reflect expectations of weaker private investment dynamics than previously anticipated, as a result of increased uncertainty related to both external and internal factors.”