Mexican construction sector expected to take a hit next year

Political uncertainty and fiscal consolidation will hit Mexico’s construction sector hard next year.

After registering 6.5% growth in 2024, construction GDP will see a contraction of 7%, according to a note by bank Citibanamex. This scenario would represent the sector’s first contraction since the 17.7% drop in 2020 due to COVID-19 paralysis.

Sector investment could fall 6.7% in 2025, after growing 8% this year, the note said. 

The reasons for the pessimistic outlook are a 14% reduction in investment in physical projects, including infrastructure, announced by the finance ministry to reduce the fiscal deficit of 6%, and because the previous administration’s flagship infrastructure projects are almost finished.

But the impact could be eased, among others, by public-private collaboration to create more projects, seeking positive relations with the next US government, taking advantage of nearshoring and by boosting housing. 

The negative effects of companies’ loss of trust in the country will remain to be felt, however.

“The environment of uncertainty will persist given the threats of tariff imposition and other adverse policies for Mexico on behalf of US President-elect Donald Trump. That will cause more careful decisions from the companies regarding investments,” the note said.

Last week, the economic studies director of financial group Monex, Janneth Quiroz, and Monex trading analyst Brian Rodríguez also said that uncertainty will translate into more careful choices by investors.

“Facing uncertainty, investors will go slower until they know which policies will be adopted by Mexico and by the United States,” said Quiroz. 

“We have seen less and less nearshoring-related announcements, or pauses like the case of Tesla,” Rodríguez added, “It is yet to be seen if the attractive speed of the nearshoring trend remains for 2025.”