IMF Predicts Cooling Growth for 2025 and Urges Mexico to Accelerate Fiscal Consolidation
The Mexican economy is expected to face a sharper slowdown in 2025, with growth close to 1% and a slight improvement towards 2026, reaching around 1.5%, according to a recent assessment by the International Monetary Fund (IMF). The organization attributes this softer momentum to a combination of fiscal consolidation, continued restrictive monetary policy, and greater trade uncertainty—factors that have dampened private consumption and investment.
The IMF mission that visited Mexico in late August emphasized that reducing the deficit should be a priority to contain the debt trajectory and rebuild policy space to withstand possible external shocks. The Fund recommends anchoring the adjustment with credible and gradual measures—including broadening the tax base, improving tax collection efficiency, and reviewing expenditure—along with prudent management of contingent liabilities, particularly those related to state-owned energy companies.
On monetary policy, the IMF stated that rate cuts should only progress as inflation’s convergence toward the Bank of Mexico’s 3% target becomes certain. Although headline inflation has eased from its 2022-2023 peaks and inflation expectations have stabilized, lingering service-sector price pressures related to wage increases and strong internal demand call for caution. With real interest rates still high and a volatile peso, the restrictive policy stance continues to support disinflation.
The growth outlook reflects both internal and external factors. After solid expansion in 2023, 2024 is showing a moderation due to the normalization of the economic cycle, maturing public projects, and a tighter financial environment. Manufacturing investment linked to “nearshoring” remains supportive, but faces bottlenecks in energy, water, permits, and logistics that delay full project implementation. At the same time, record remittances and a resilient labor market are sustaining consumption, although signs of softening are emerging.
External factors continue to play a decisive role. Activity in the United States—Mexico’s main trading partner—potential tariff changes, and the evolution of rules of origin in strategic sectors may affect trade and investment flows. A greater-than-expected tightening of global financial conditions or fresh geopolitical disruptions also figure among the downside risks for the Mexican economy.
In the medium term, the IMF stresses that economic success will depend on closing infrastructure gaps, strengthening the rule of law, and deepening integration with global partners. Improving electricity transmission and generation, expanding port and customs capacity, addressing water shortages in northern industrial hubs, and boosting competition in key sectors are necessary steps to turn interest in relocation into sustained growth and higher productivity.
In summary, the IMF’s outlook points to lower growth in 2025, with gradual recovery later on if orderly fiscal adjustment moves forward and consistent disinflation is achieved. The risk balance suggests caution, but also presents an opportunity: if Mexico accelerates reforms to reduce bottlenecks and brings greater regulatory certainty, the potential of nearshoring and the internal market’s resilience could support a more balanced expansion cycle.
Outlook: The short term will be marked by fiscal discipline and monetary caution, while medium-term momentum will depend on infrastructure, legal certainty, and trade integration. The key will be to translate investor interest into productive capacity, without losing macroeconomic anchors.
