The Mexican economy will grow between 2.5% and 3.5% in 2024. The peso will trade at 17.8 to the US dollar at the end of the year. Headline inflation will be 3.8% in December.
They are among the forecasts in a Finance Ministry (SHCP) document submitted to the federal Congress on Wednesday. Entitled “General Pre-Criteria for Economic Policy 2025,” the document also includes forecasts for next year.
Let’s take a look at what’s in store for the Mexican economy, according to the federal government.
Economic growth
The SHCP predicts that GDP growth will slow to 2-3% in 2025 from 2.5-3.5% this year.
Mexico’s economy expanded by 3.2% in 2023, according to data published by the national statistics agency INEGI last month.
The SHCP said in a statement that it expects economic growth in 2024 and 2025 to be driven by “solid internal demand” and also predicted “a significant contribution from greater levels of investment, both public and private.”
“To a large extent, the resources [from investment] will go to the development of non-residential infrastructure, which will allow Mexico to increase its participation in international value chains,” the ministry said.
Foreign direct investment (FDI) in Mexico is currently increasing as a growing number of international companies – especially manufacturing ones – establish a presence here or expand their existing operations. High FDI could help to boost GDP growth in coming years as those companies commence or ramp up their production.
The SHCP said that the “possible moderation” of economic growth this year and next compared to 2023 “would be due to the normalization of the performance of some sub-sectors of the services sector” that performed extremely well after the full resumption of economic activities following the COVID-19 pandemic, as well as a reduction in “the accumulated savings of households” and projected lower growth in the United States, which would affect Mexican exports, tourism and the entry of remittances.
The USD:MXN exchange rate
If the peso ends the year at 17.8 to the dollar, as the SHCP predicts, the currency will have depreciated 7% from its closing level on Wednesday of 16.55.
The peso on Wednesday reached 16.52 to the greenback, its strongest position in more than eight years.
The SCHP forecasts that the peso will weaken further in 2025 to end the year at 18 to the dollar.
Inflation
The SHCP anticipates that headline inflation will be 3.8% in December of this year and 3.3% a year later. Both levels are within the Bank of Mexico’s target range of 3% +/- one percentage point.
Mexico’s headline rate was 4.48% in the first half of March, up from 4.40% in February.
The Bank of Mexico maintained its key interest rate at a record high of 11.25% for a year from March 2023 as it sought to drive inflation down, but it made a 25-basis-point cut last week and additional reductions are considered likely later in the year.
Crude oil production and exports
SHCP predicts that average crude oil production will be 1.85 million barrels per day (bpd) in 2024 and 1.86 million bpd in 2025.
State oil company Pemex pumped an average of just 1.55 million bpd of crude in February, its lowest level since 1979, Reuters reported.
“Pemex’s oil output, the sales of which are a major contributor to public finances, has been on a steady decline from its peak of 3.4 million bpd two decades ago,” the news agency added.
The federal government is aiming to change that situation by upgrading existing Pemex refineries and opening a new one on the Tabasco coast.
Meanwhile, the SHCP predicts that crude exports will average 967,600 bpd this year before falling to 958,400 bpd in 2025.
The federal government is aiming to achieve self-sufficiency for fuel and thus crude exports are expected to decrease. Projections presented by Pemex CEO Octavio Romero in January showed that the soonest self-sufficiency can be achieved is 2027.
With reports from Aristegui Noticias, El Economista and Excélsior
