IMF reduces Mexico’s growth forecast for 2024 and 2025

October 15, 2024

The IMF explained its gloomy outlook by citing, among other factors, investor concerns about a recently passed judicial reform package. (Shutterstock)

The International Monetary Fund (IMF) on Tuesday lowered its 2024 economic growth forecast for Mexico to 1.5% while projecting even slower growth in 2025.

Citing capacity limitations and a restrictive monetary policy, the IMF foresees Latin America’s second-biggest economy dipping to 1.3% in 2025, but it does expect Mexico to guide inflation toward the Bank of Mexico’s 3% target.

Mexico's President Claudia Sheinbaum behind a podium at a press conference in the National Palace. — President Sheinbaum inherited the controversial set of judicial reforms that passed just before she took office. She has tried to reassure global investors that it will not destabilize the rule of law in Mexico’s courts. (Andrea Murcia Monsivais/Cuartoscuro)

The IMF — a financial agency of the United Nations headquartered in Washington, D.C., and funded by 190 member countries — also explained its gloomy outlook by citing investor concerns about a recently passed judicial reform package that raises questions about the effectiveness of contract enforcement and the predictability of the rule of law in Mexico.

The IMF’s prediction is just the latest in a recent trend of pessimistic growth forecasts for Mexico.

Last week, the World Bank reduced its growth forecasts for Mexico for this year and the next two, citing high interest rates, a weaker peso and uncertainty for investors.

The World Bank now sees the Mexican economy growing by 1.7% this year, 0.6 percentage points lower than its 2.3% forecast in June. At the same time, the World Bank also lowered its 2025 forecast by 0.6 points to 1.5%, while its 2026 forecast shrank from 2% to 1.6%

And last week, BBVA México — Mexico’s largest financial institution — released a report showing a decline in consumer confidence this year, its biggest downturn since the beginning of the COVID-19 pandemic.

In the same report, BBVA projected 2024 economic growth to top out at 1.2% (down from a previous forecast of 2.5%), while forecasting just 1.0% growth for 2025, citing weak internal demand and uncertainty resulting from the judicial reform.

Women checking bottles of artisanal cider in a factory assembly line in Puebla, Mexico — A recent report by the financial institution BBVA México also forecast lower growth for Mexico in 2024, citing the decline in consumer confidence and weak internal demand. (Mireya Novo/Cuartoscuro)

Although consumer spending kept increasing during the first nine months of 2024, for a total growth of 9.8%, BBVA reported, this figure was actually down 1.8% from the same period last year.

In addition, consumer spending in September showed signs of deceleration. A 1.5% increase in September lagged behind the 2.2% increase posted in August.

The newspaper El Economista reported that the BBVA Research team predicts that consumer confidence will continue to decline in the next few months as GDP growth remains low and real wages dip because of modest job growth in the industrial sector.

With reports from Reuters, El Economista and T21