Mexico’s economy will remain stagnant this year, according to a Reuters survey of economists, as the country prepares for a possible radical change in US tariff and migration rules that could dramatically worsen the outlook.
Private spending and investment, already weakened by this high uncertainty and high interest rates, will likely receive some support from measures focused on low-income workers and certain industrial sectors.
However, Mexicans are awaiting the inauguration of US President-elect Donald Trump on January 20 to see if he follows through on his threat to impose a 25% tariff on goods crossing the border. . Mexico has a free trade agreement with the US and Canada.
In Mexico, Latin America’s second-largest economy after Brazil, GDP is expected to grow 1.2% in 2025, compared with 1.6% last year, according to the median estimate of 32 economists surveyed Jan. 9-16. .
“Growth prospects are weighed down by three main factors: the lower resilience of private consumption, a weaker performance of exports and the decline in fixed investment, influenced by political uncertainty in the US and the legislative agenda in Mexico,” he wrote. Pamela Díaz Loubet, Mexico economist at BNP Paribas.
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“Although nearshoring remains a long-term opportunity, political noise and investor doubts are delaying planned capital inflows, which were previously considered engines of recovery,” he said.
President Claudia Sheinbaum’s administration has signaled that it hopes to avoid the tariffs threatened by Trump through actions on illegal immigration and drug trafficking to calm US concerns.
In another apparent gesture, Mexico unveiled a plan to curb imports from China following Trump’s accusations that it had become a backdoor for Chinese goods entering the United States.
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But even with a government currently focused on fiscal containment and with global bond yields rising, the Reuters poll suggests Banxico has limited room to ease monetary policy more aggressively and support economic activity in a worse scenery.
The central bank cut its benchmark rate to 10% from a record high of 11.25% in five quarter-percentage point moves last year. It is forecast to reduce them another 150 basis points to 8.50% by the end of 2025, according to survey medians.
Asked how the central bank would react if Washington announces new tariffs on Mexico this month, seven of 11 respondents said it should maintain the currently expected path of monetary easing.
Three said Banxico would cut rates less than currently expected, while only one expected deeper cuts.
“Although higher tariffs would add obstacles to growth in Mexico, the immediate response would be, at most, to maintain the pace of cuts; not accelerate it to movements of 50 basis points,” said Alberto Ramos, head of economic research for Latin America at Goldman Sachs.
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“It will be difficult for Banxico to follow a very moderate path. “Doing so could trigger a negative market reaction that would lead to tighter rather than looser financial conditions, and would soon force the central bank to return to a conservative stance,” he added.
With information from Reuters
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