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Mexico's Economy Grinds to Halt: Growth Near Zero
27 Nov
Summary
- Mexico's economic growth forecast slashed to near zero percent.
- Third-quarter GDP contracted by 0.3% due to industrial weakness.
- Central bank maintains inflation target despite doubts.
Latin America's second-largest economy is facing significant headwinds, prompting the Bank of Mexico to drastically lower its 2025 growth forecast to a mere 0.3%. This downgrade reflects a worse-than-expected performance in the third quarter, where GDP contracted by 0.3%, primarily due to slumping industrial output and reduced auto exports amidst ongoing trade tensions.
The central bank's decision comes amid internal debate regarding its monetary policy. Despite a series of benchmark rate cuts, totaling four percentage points since early last year, concerns have been raised about the reliability of Banxico's inflation forecasts. Officials are closely watching annual headline inflation, which stood at 3.61% in early November.
While the bank aims to achieve its 3% inflation target by the latter half of next year, projections from analysts suggest a potentially higher inflation rate. This divergence in outlook highlights the delicate balancing act Banxico faces in stimulating growth while managing price stability in an uncertain economic climate.
