Mexico’s GDP grows 0.7% in 2025: a late-year rebound avoids recession, but confirms the slowdown
Mexico’s economy ended 2025 with growth of 0.7%, its weakest annual performance since the contraction seen in 2020, according to INEGI’s preliminary estimate of Gross Domestic Product (GDP). The figure capped off a year of fading economic momentum after downward revisions to both public and private forecasts, and it put the challenge back on the table of raising potential growth in an environment of subdued investment and still-high financing costs.
The last stretch of the year, however, offered some relief. In the fourth quarter, GDP rose 0.8% from the previous quarter (seasonally adjusted) and 1.6% year over year—better than feared and enough to ease the risk of a technical recession. Even so, the year’s picture was mixed: marginal gains in the first half, a decline in the third quarter, and a final rebound that prevented an even weaker outcome.
By components, services once again accounted for most of the growth. In the fourth quarter, tertiary activities climbed 2.0% year over year, supported by consumer spending in urban segments, telecommunications, transportation, and some professional services. Primary activities grew 6.0% year over year, partly due to seasonal effects and stronger performance in certain crops and livestock. In contrast, secondary activities—manufacturing, construction, and mining—barely increased 0.3% year over year in the fourth quarter, reflecting a fragile industrial backdrop and uneven momentum in construction as the year closed.
For full-year 2025 versus 2024, the sector breakdown highlighted the main warning sign: secondary activities fell 1.1%, while tertiary activities rose 1.4% and primary activities increased 3.7%. Industrial weakness is especially important because it concentrates supply-chain linkages, formal employment, and exports—and because Mexico relies on North America–integrated manufacturing to sustain its economic cycle. When factory output and construction lose steam, the effects are typically felt in orders, subcontracting, and the creation of IMSS-registered jobs.
The backdrop was a year in which the economy moved with misaligned engines: domestic demand held up in some areas thanks to the labor market and remittance flows, while the industrial sector faced a mix of softer external momentum, business caution, and financing costs that—despite signs of easing as inflation cooled—remained a drag on capital-intensive projects. Added to that were the uncertainty that comes with a change in administration and expectations around policy and infrastructure decisions.
The international environment also weighed. Activity in the United States, Mexico’s main trading partner, slowed compared with prior years, which tends to show up in weaker manufacturing orders, especially in sectors tied to autos, electronics, and machinery. At the same time, bouts of global financial volatility—linked to higher rates for longer and geopolitical tensions—kept markets focused on the exchange rate, the risk premium, and the path of investment.
The 0.7% result also revived the debate over structural growth. In recent years, Mexico has shown periods of moderate expansion alternating with stagnation, limiting gains in income per capita: when an economy grows around 1% a year, GDP per capita tends to move little, especially if productivity does not pick up. Analysts have stressed that beyond the cycle, the country faces persistent challenges: low fixed investment, energy and logistics bottlenecks, regional disparities, insecurity, and uneven technology adoption across firms.
For 2026, the starting point looks mixed. On one hand, the relocation of supply chains (nearshoring) continues to offer opportunities for manufacturing, logistics services, and industrial parks, particularly in the North and the Bajío region. On the other, turning those projects into reality depends on the availability of electricity and water, regulatory certainty, and infrastructure capacity, as well as a global environment that could remain volatile. The inflation trajectory and monetary policy decisions will be key: an orderly decline in interest rates could ease borrowing costs, although room to maneuver will depend on the balance between inflation, growth, and financial stability.
On the fiscal front, low growth tends to complicate revenue collection and increase pressure to prioritize spending and public investment. With high social needs and infrastructure commitments, the margin typically narrows if the economy does not accelerate. That forces a technical discussion on how to boost productive investment, raise productivity, and strengthen the rule of law—variables that often end up mattering more than short-term stimulus.
In short, the close of 2025 avoided a recession scenario, but it did not change the underlying diagnosis: Mexico ended the year with an economy supported by services and consumption, while industry and construction showed weakness. The performance opens 2026 with the urgency of turning opportunities like nearshoring into real investment and faster growth, without neglecting macroeconomic stability.
