The outlook for the Mexican economy looks bleak. The Board of Directors of the Bank of Mexico (Banxico) cut its GDP growth forecast by half until the end of 2025, from 0.6% in August, to 0.3%. The range fell to two-tenths of a percentage point from its worst forecast, made mid-year, when it was set at 0.1%.
Victoria Rodríguez Ceja, Governor of the Central Bank, on Wednesday during her presentation highlighted the economic slowdown in the country. The official said at the conference, where she was accompanied by the organization’s deputy governors, that “the national economy has been going through a period of noticeable weakness.”
The general rise in prices remains one of the factors determining why we are less optimistic at the end of the year. Inflation, which reached 3.61% at an annual rate during the first half of November, is one of the main components of economic pessimism. However, Banxico members stated that they would continue the cycle of cuts in the reference interest rate, lowering the cost of money. “We will consider lowering the reference rate so that the inflation path is consistent to reach the target in an orderly and sustainable manner towards the set target of 3%,” Rodriguez Ceja said.
The two components that determine general inflation in Mexico have shown general increases. Core inflation, which determines the path of general inflation in the medium and long term, remained above 4%, reflecting a negative trend in price behavior in the country. Despite this, lowering the interest rate seeks to restore the country’s financial stability. The Governor of the Central Bank of Mexico stated that “these reductions in the reference rate do not represent an attitude of tolerance or indifference towards inflation, but rather are an appropriate monetary policy response, with a responsible and forward-looking approach.”
The deterioration of the industrial and manufacturing sector is another factor that contributed to Banxico downgrading its growth prospects. Until the third quarter of this year, secondary activities (industry and manufacturing) decreased by 1.48% compared to the second quarter, while tertiary and primary activities increased.
0.22 and 3.53%, respectively. “Thus, the industrial sector highlighted its downward trend,” the Banxico report said.
For 2026, the price rise does not seem to have a good prospect, after the Mexican Congress approved the so-called “healthy” taxes on soft drinks, tobacco, gambling and violent video games by increasing the rate of the special tax on products and services (IEPS).
As if that were not enough, increasing trade tensions between Mexico and the United States add an additional layer of pressure on the economy’s growth. “Private consumption will show an upward trend, while investment will remain weak at least until the second half of 2026, given the prevailing uncertainty about the trade relationship with the United States and the next review of the USMCA agreement,” Rodriguez Ceja said.