Mexico’s GDP Outlook Brightens for 2024 Amid Economic Adjustments

Mexico

Private-sector analysts have slightly raised Mexico's GDP growth forecast for 2024 to 1.6%, up from 1.53% in the central bank’s final survey of the year. This revision follows the Mexican statistics agency Inegi's adjustment of third-quarter GDP growth to 1.6% from 1.5% in November, signaling a modest but positive trend for the country’s economy.

Mixed Forecasts for 2025 and Beyond

While 2024 projections showed a slight improvement, the 2025 GDP forecast has dipped to 1.12%, down from 1.2% in November. This forecast lags behind the central bank's projection of 1.2%, reaffirmed during its recent quarterly presentation. The central bank highlighted potential risks stemming from geopolitical uncertainties and evolving US-Mexico trade policies, which could affect the broader economic outlook.

For the first time, the December survey introduced 2026 projections, forecasting a modest GDP growth of 1.8%, alongside an easing of headline inflation to 3.7%. Analysts anticipate the Mexican peso exchange rate will reach Ps21/$1 by the end of 2026, reflecting gradual depreciation.

Monetary Policy and Exchange Rate Adjustments

Mexico’s central bank is expected to implement a 25-basis-point rate cut on 19 December 2024, reducing the target rate to 10%. Analysts forecast further reductions, with the target rate potentially declining to 8% by the end of 2025. For 2026, the central bank is expected to moderate its rate cuts, settling at 7.5% by year-end.

The December survey also included updated exchange rate forecasts, predicting the peso will trade at Ps20.25/$1 by the end of 2024, slightly stronger than the Ps20.29/$1 estimate from November. For 2025, the exchange rate is projected at Ps20.53/$1, a marginal adjustment from the previous Ps20.59/$1 forecast.

Key Economic Drivers

Several factors are shaping Mexico’s economic trajectory:

1. Monetary Policy: The anticipated rate cuts aim to stimulate economic growth while balancing inflationary pressures.
2. Geopolitical Risks: US-Mexico trade dynamics and global uncertainties continue to influence forecasts.
3. Currency Stability: The peso's relatively stable outlook reflects confidence in Mexico’s economic management and its trade relationships.

While near-term growth remains modest, the introduction of 2026 projections highlights the potential for a more stable economic environment, supported by easing inflation and a favorable monetary policy stance.