2024–2026 Outlook: Again No Landing Worldwide, Soft Landing in Mexico

Genevieve Signoret & Delia Paredes

(Hay una versión en español de este artículo aquí.)

Executive Summary

We present our global outlook and our outlook for Mexico for the next eight quarters. To forecast, we take a multi-scenario approach. In this instance, we visualize three scenarios for both the global economy and Mexico.

Our base case, No Global Landing, Soft Landing in Mexico, assumes no worsening of geopolitical tensions and sustained demand for new homes in the United States. Also, no radical change in trade, immigration, or fiscal policy, meaning that either Harris will become president or, if Trump does, that the judicial and legislative branches as well as free trade agreements to which the United States is signatory will limit how much damage he can do.

For Mexico, this base case assumes that fiscal authorities will agree that, to shrink the deficit, they should move gradually. It assumes, further, that violence will not worsen, and that the government will produce some sort of plan to reform Pemex that is seen as credible but will fail to plan for enough investment in the country’s power grid to inspire any meaningful surge in fixed investment.

Under these assumptions, global economic activity continues to expand, inflation and rates come down slowly, and the equity bull market continues. In Mexico, however, the slowdown is sharper, with the economy even shrinking a bit briefly before rebounding, and ending the two-year forecast period dragging along at an anemic pace. The dollar appreciates against the peso, while weakening against the euro and the yen.

We assign a subjective probability to our base case of 70%.

We also have two risk cases. In Soft Global Landing, Hard Landing in Mexico, the global slowdown is sharper than in our base case, and Mexico sinks into recession. In Roller Coaster, inflation resurges, central banks switch to tightening from loosening, this sparks a global recession, then rates again come down.

Read the full report here.

 
 
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