Mexico | Macroeconomic outlook for 2024 and fiscal challenges in 2025

Given that one of the most relevant factors for the dynamism of the external motor of the Mexican economy will be the unfolding of interest rates in the US, the possibility of more inflationary persistence in that country could decelerate the external motor more than anticipated.

Key points

• Key points:
• Nevertheless, up to now our forecasts indicate that the Mexican economy will continue showing dynamism in 2024, mainly supported by the resilience of private consumption and the strength of the labor market. Our GDP growth forecast for 2024 is 2.9% vs. 3.4% in 2023.
• Given the upward revision of the core inflation forecasts released by Banxico in December and the downward stickiness that services inflation is still showing, it is very likely that the central bank will push back the beginning of the loosening cycle to March.
• The gradual convergence of annual inflation towards its target of 3.0% in 2024 will contribute to policy decisions by the central bank which will take the benchmark rate to 9.0% (with a positive bias) by year-end.
• The next federal government will face important economic challenges. In particular, it stands out the fiscal consolidation challenge given the very low margin for tax revenue growth and the pressure on public spending derived from the continuity of the social programs initiated by the current federal government.

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