The Mexican economy is going through a delicate moment. In recent months, economic indicators have made it clear that growth is weakening and that the risks of a recession in 2025 are increasing. The latest data show a slowdown in key manufacturing sectors, a decline in productive investment, and uncertainty weighing on the entire national economy. The combination of external factors—such as trade tensions with the United States—and internal ones—such as business distrust and lack of investment—has placed Mexico in a complicated situation, where the room for maneuver to avoid a recession is increasingly limited.
GDP is already showing worrying signs of slowdown, with a quarterly decline at the end of 2024 and weak annual growth. Meanwhile, the Bank of Mexico has lowered its estimates for 2025, reflecting a much less optimistic scenario than the one projected by the Ministry of Finance. The key question is: will the Mexican economy withstand the storm, or are we on the brink of a recession? In this analysis, I review the latest data and some of the topics that will shape the country’s direction in the coming months.
GDP Evolution: A Worrying Outlook
Mexico’s Gross Domestic Product (GDP) has been growing at increasingly lower rates since the third quarter of 2022. In the fourth quarter of 2024, GDP fell by -0.6% quarter-over-quarter and recorded only a 0.5% annual growth. This figure is significantly lower than the 3.3% growth rate observed for the entire year of 2023, meaning that this year we grew less than half compared to last year.
Sectoral analysis shows a significant deterioration in secondary and primary activities. Primary activities, including agriculture, livestock, and forestry, declined by -2.1% annually in 2024, reflecting the difficult situation in agricultural production. This phenomenon is partly due to adverse weather conditions but also to reduced investment in agricultural infrastructure.
Secondary activities, encompassing mining, manufacturing, construction, and electricity generation, grew by just 0.1% in 2024 but ended the year with a sharp -2.0% annual decline in the fourth quarter. Within this group, construction contracted by -6.8% annually in the fourth quarter, reflecting lower public and private investment in infrastructure. Meanwhile, manufacturing saw 0% annual growth in the last quarter of the year, largely due to reduced external demand and uncertainty about the future of the USMCA.
Despite the overall weakness, the tertiary sector, composed of services and commerce, grew by 2.1% in the balance for 2024, as well as at an annual rate in the last quarter of that year. However, in the same quarter, wholesale trade contracted by -1.6%, while temporary accommodation services and food and beverage preparation fell by -1.9%, indicating lower economic activity and reduced domestic demand.
Commerce and Services: A Troubled Domestic Market
Data from the Monthly Survey on Commercial Enterprises (EMEC) also reflect this slowdown. In December 2024, revenues of wholesale commercial enterprises decreased by -4.4% annually, while retail trade revenues fell by -0.6%. This decline in retail trade is a clear indicator that consumers are cutting their spending amid economic uncertainty.
In the services sector, revenues of private non-financial services fell by -1.0% monthly in December, while total business expenses in the sector declined by -5.1%, reflecting a contraction in investment and consumption. Although annual revenues increased by 2.5%, the slowdown in growth suggests that the sector faces significant challenges.
Banxico Cuts Its Economic Growth Estimate
In this context, on Wednesday, February 19, the Bank of Mexico presented its report for the fourth quarter of 2024, significantly lowering its growth forecast for 2025, estimating a GDP expansion of just 0.6%, down from its previous projection of 1.2%. According to the central bank, this downward revision is due to the uncertainty generated by trade threats from the new U.S. government and their possible impacts on the national economy.
It is worth noting that this new Banxico forecast contrasts with that of the Ministry of Finance and Public Credit (SHCP), which maintains an estimated 2.3% growth in its General Economic Policy Criteria for 2025—a figure that is simply unattainable if the current uncertainty continues.
Having economic growth this year well below the 2.3% target has very important implications, as it means that the Tax Administration Service (SAT) will not achieve its tax revenue objectives. If the economy does not grow sufficiently, there will be lower revenues from Income Tax (ISR), Value Added Tax (IVA), Special Tax on Production and Services (IEPS), etc., forcing the federal government to either cut public spending (which seems highly unlikely) or incur more debt. As a result, I anticipate that the Federal Public Sector’s Financial Requirements, the broadest measure of debt, will not be 3.9% of GDP this year but approximately 4.5%. This will undoubtedly be closely monitored by credit rating agencies.
Uncertainty Factors: External and Internal Pressures
The weakening of the national economy is not solely due to Donald Trump’s threats or a single factor but to the convergence of various internal and external elements that have created an uncertain environment, slowing investment since last year. Internally, business and investor distrust has been exacerbated by the lack of checks and balances from the federal government, as well as legal changes, particularly judicial reform and the elimination of autonomous agencies. This has led to the cancellation or postponement of key productive projects, limiting the growth of the industrial and construction sectors.
Externally, the situation is equally concerning. Donald Trump has threatened to impose 25% tariffs on Mexican products to pressure the Mexican government to strengthen migration control and combat fentanyl trafficking. If implemented, this measure could have a negative GDP impact of 2 percentage points and lead to businesses leaving Mexico. Additionally, it could spark a trade war that would severely affect strategic sectors such as automotive, steel, and manufacturing, which heavily depend on the U.S. market.
The Risk of a Recession in 2025
As I have pointed out in this space, the available data suggest a challenging 2025 for the Mexican economy. With GDP showing signs of stagnation and various strategic sectors already in outright contraction, the possibility of a recession in 2025 becomes increasingly real. The deterioration of the international environment, with a potential trade war driven by Trump and uncertainty about the future of the USMCA, only adds pressure to the economic outlook.
The labor market is very weak, with only 178,139 formal jobs registered with the IMSS between January 2024 and the same month in 2025, implying a growth rate of just 0.80%. In this context, job creation could also be affected. Despite wage increases in some sectors, the decline in consumption and investment could lead to lower job creation in the coming months.
Conclusion: The Urgency of Corrective Measures
If the Mexican government wants to avoid a major crisis, it is essential to build confidence among businesses and investors through a clear and stable legal framework and economic policies, as well as strengthening the country’s competitiveness amid international trade challenges.
The private sector also has an important role in seeking solutions. Market diversification, investment in technology, and productivity improvements could mitigate some of the negative impact of tariffs and economic uncertainty. However, if appropriate measures are not taken in the short term, Mexico could face a significant economic recession with adverse effects on the population’s well-being.
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Alejandro Gómez Tamez*
Director General GAEAP*
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