The outlook for the Mexican economy appears bleak. The board of directors of the Bank of Mexico (Banxico) cut its gross domestic product (GDP) growth forecast for the end of 2025 by half, from 0.6% estimated in August to 0.3%. The range fell to two-tenths of a percentage point from the worst forecast, prepared mid-year, and when it was set at 0.1%.
Victoria Rodríguez Ceja, governor of the Central Bank, highlighted the country’s economic cooling during her presentation on Wednesday. “The national economy continued to go through a period of marked weakness,” the official recalled during the conference, where she was accompanied by the organization’s deputy governors.
The general increase in prices continues to be one of the determining factors for being less optimistic at the end of the year. Inflation, which stood at 3.61% on an annual basis in the first half of November, is one of the main components of economic pessimism. However, Banxico members say they will continue the cycle of cuts to the benchmark interest rate, lowering the cost of borrowing. “We will consider cutting the policy rate so that the trajectory of inflation is consistent to bring it to the target in an orderly and sustained manner towards the specific target of 3%,” Rodríguez Ceja said.
The two components that determine general inflation in Mexico showed generalized increases. Core inflation, which determines the trajectory of overall inflation in the medium to long term, remained above 4%, reflecting a negative trend for price behavior in the country. Despite this, the rate cut aims to restore the country’s financial stability. “These cuts to the reference rate do not represent an attitude of tolerance or indifference towards inflation, but rather the appropriate monetary policy response, with a responsible and far-sighted approach,” said the Mexican central banker.
The deterioration of the industrial and manufacturing sector is another factor that has contributed to lowering Banxico’s growth prospects. Up to 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. “The industrial sector has thus accentuated its downward trend,” reads the Banxico report.
For 2026, price increases do not appear to have a good horizon, after the Mexican Congress approved 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 weren’t enough, rising trade tensions between Mexico and the United States add an extra layer of pressure to the economy’s growth. “Private consumption would show an upward trend, while investments would remain weak at least until the second half of 2026, given the uncertainty that prevails over trade relations with the United States and the upcoming revision of the USMCA,” Rodríguez Ceja said.
