April 02, 2025
Mexico’s government projects economic growth between 1.5% and 2.3% this year, a downward revision from the previous estimate of 2.0% to 3.0%, according to a draft budget released by the finance ministry on Tuesday. Despite being labeled as conservative, this forecast is more optimistic than those from the private sector and Mexico’s central bank, amid fears of an impending recession.
The finance ministry also predicts economic growth between 1.5% and 2.5% for 2026. Latin America’s second-largest economy has faced challenges recently, including declining investor confidence, U.S. tariff threats, and a prolonged drought. The economy contracted in the fourth quarter and again in January, with a first-quarter contraction potentially leading to a technical recession.
In a statement, the finance ministry attributed the revised 2025 growth forecast to weaker residential investment and ongoing supply shocks since late last year. “Additionally, business caution driven by uncertainty over U.S. trade policy is also a contributing factor,” the statement added.
In February, the autonomous Bank of Mexico forecasted that the economy in 2025 could shrink by up to 0.2% or grow by as much as 1.4%. Earlier on Tuesday, private sector analysts surveyed by Mexico’s central bank lowered their average growth forecast for the year to just 0.5%.
The finance ministry remains optimistic, citing domestic consumption, job creation, and investments in strategic sectors as key drivers of growth this year. Mexico’s economy has posed significant challenges for President Claudia Sheinbaum, who inherited the country’s highest budget deficit since the 1980s upon taking office in October, yet has resisted calls for deep fiscal reform.
The budget document, which guides lawmakers in future spending plans, also forecasts a budget deficit between 3.9% and 4.0% this year, decreasing to between 3.2% and 3.5% in 2026. Annual inflation is expected to end the year at 3.5%, within the central bank’s target range of 3%, plus or minus one percentage point, and slightly down from the 3.77% recorded in February. For 2026, inflation is projected to ease further to 3.0%.
The finance ministry anticipates the peso trading at 20.0 pesos per dollar by the end of this year, with a slight strengthening to 19.7 pesos per dollar next year. Average crude oil production is forecasted at 1.762 million barrels per day (bpd) this year, rising to 1.775 million bpd in 2026.
Source: (Reuters)
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