According to the latest forecasts released by the International Monetary Fund (IMF) on November 1, Mexico's economic growth will slow to around 1.5% in 2024 and to just 1.3% by 2025. The IMF notes that Mexico will need to adopt a wide range of reform measures to achieve sustainable and inclusive growth.
Despite increased government spending in Mexico, private sector consumption, investment and employment growth are all decelerating due to lower-than-expected growth in the United States, increased global risk aversion, and uncertainty brought about by recent domestic judicial reforms that could put pressure on Mexico's output. Prior to the release of its latest forecasts, the IMF approved the current two-year flexible credit line arrangement with Mexico, amounting to approximately USD 35 billion.
According to the latest predictions, Mexico's budget deficit will increase significantly in 2024, with total public sector debt rising to 58 percent of GDP by the end of the year. While inflation risks remain on an upward trend, continued monetary tightening and economic slowdown are expected to reduce inflation to the target of 3 percent set by the Bank of Mexico by 2025.
To achieve the target set by the central bank and maintain the sustainability of public finances, Mexico's fiscal budget for 2025 should include a credible fiscal consolidation plan. With regard to Mexico's structural reform agenda, improving governance is a priority in all areas of economic and social development, which includes strengthening the rule of law, combating corruption and crime, and improving government efficiency as a means of improving the business environment, reducing administrative burdens, and lowering the cost of market access for firms, which will attract more investment.
Picture Source: Unsplash