Economic Outline

Economic Indicators

Mexico is among the world's 15 largest economies and is the second-largest economy in Latin America. The country is highly dependent on the United States, its main trading partner and destination of nearly 80% of its exports. Over the past three decades, Mexico's growth, inclusion, and poverty reduction have lagged behind similar countries. From 1980 to 2022, the economy grew at an average rate of just over 2% annually, hindering progress in narrowing the gap with high-income economies. However, in 2023, the economy grew by 3.2%, while in 2024 growth slowed to 1.5% due to binding capacity constraints and restrictive monetary policy, reflecting a moderation after the post-pandemic rebound. Growth is expected to slow further in 2025 (to 1.4%) due to the withdrawal of fiscal stimulus and a slowdown in the U.S. Over the medium term, growth is projected to converge to a potential rate of around 2% (IMF).

The fiscal position was highly procyclical in 2024. Under the authorities’ plans, the overall deficit was expected to increase to 5.9% of GDP, representing a fiscal impulse of 2.2% of GDP. While revenues slightly exceeded expectations, mainly due to higher oil prices, spending on pensions and major infrastructure projects was also higher. Additional support for Pemex or unexpected infrastructure expenditures towards the end of the year brought the deficit to around 6.2%. With gross public sector debt estimated at 57.7% of GDP by the end of 2024, Mexico still has some fiscal space to address temporary shocks. As per the government budget, a deficit of 3.2% of GDP is estimated for 2025, along with a primary budget surplus of 0.6% of GDP, whereas the debt-to-GDP ratio should remain stable. The inflation rate decelerated to 4.2% in December 2024, the lowest rate since February 2021. It is expected to return to the 3% target by the end of 2025; however, risks to inflation remain on the upside, mainly from more persistent services inflation, higher commodity prices, or weather-related shocks (IMF).

As of December 2024, Mexico's unemployment rate dropped to 2.4% of the economically active population. Informal workers totalled 31.8 million, with an informality rate of 53.7%. The data from INEGI reveals a persistent gender gap, as the female labour force participation rate fell by 0.3 percentage points to 46% of the working-age population, while the male rate dropped by 0.6%. Mexico's official multidimensional poverty rate, which includes income poverty and six indicators of social deprivation, decreased from 43.2% in 2016 to 36.3% in 2022, lifting 5.4 million people out of poverty. The World Bank projects that poverty will continue to decline slowly through 2026. Finally, the country’s GDP per capita (PPP) was estimated at USD 24,971 in 2024 by the IMF.

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