Banxico Lowers Growth Forecast for 2025 and Warns About Possible Recession

The Bank of Mexico (Banxico) reported on Wednesday that it lowered its growth expectation for 2025, reflecting a pessimistic view of the national economy.

The new forecast reduces the growth expectation to 0.6%, from the previously projected 1.2%. Additionally, it warned that the Mexican economy will expand moderately in the coming years.

The central bank explained that the economic weakness will be more pronounced in the first half of 2025, due to the decline in consumption and the decrease in private investment. This, in turn, is a consequence of the "high uncertainty" caused by the policies of the U.S. government.

Banxico foresees a stagnant economy

Banxico's quarterly report maintains a concerning tone about the evolution of the economy:

"As in the previous report, the forecasts assume that economic activity will continue to show weakness in 2025."

The central bank also highlighted the uncertainty regarding the policies of the new administration in the United States, whose impact is still unknown.

Additionally, it raised its projection for general and core inflation for 2025, from 3.0% to 3.3%.

The government remains optimistic

Despite Banxico's adjustment, the Mexican government continues to bet on more robust growth. At the end of January, the federal administration reiterated its expectation of economic expansion, projecting growth between 2% and 3% for 2025, ignoring the signs of slowdown.

However, recent figures indicate that the economy contracted in the last quarter of 2024 more than expected, with a decline of 0.6%, according to seasonally adjusted preliminary data.

Banxico doesn't rule out a recession

The outlook could be even more critical. Banxico warns that, in a pessimistic scenario, the Mexican economy could register a contraction of 0.2% in 2025.

On the other hand, in its most optimistic scenario, growth would reach 1.4%. This wide margin reflects the economic uncertainty facing the country.

Another concerning data point is the decrease in the projection of formal employment. Banxico foresees the creation of between 220,000 and 420,000 jobs, a figure considerably lower than the previous range of 340,000 to 540,000.

Conclusion

Banxico's report paints a complex and challenging picture for the Mexican economy in 2025. With weak growth, lower investment, and the possibility of a recession, uncertainty continues to dominate the economic landscape.

Monitoring the upcoming economic decisions will be crucial to determine the true trajectory of the Mexican economy in the coming months.