Is Mexico Heading Toward a Recession?

Delia Paredes & Genevieve Signoret

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

In line with our expectations and following a brief rebound during the third quarter of last year, the Mexican economy contracted in the final quarter.

Seasonally adjusted figures show that 2024 GDP fell in the fourth quarter of 2024 by an annualized 2.5% from the quarter before, owing to sharp declines in agriculture (-29.8%) and industry (-5.8%). Service output grew by scant 0.8%.

From October to December 2024, the Mexican economy contracted sharply from quarter three to end up just half a percentage point above where in stood at end-2023

Growth in 2024 was just 1.5%[1] (versus 3.3% in 2023), owing to weaker momentum in both services and construction. This slowdown stemmed from not only the completion of AMLO’s flagship public works projects but also a drop in private investment.

For the full year, the Mexican economy grew by a mere 1.5%, compared with 3.3% the year prior.

In 2024, the Mexican economy grew by just 1.5%, after a 3.3% the year before

Gross domestic product by sector, %

Source: Inegi.

Heading Toward a Technical Recession?

Should GDP contract again this quarter, then the definition of a technical recession—two consecutive quarters of contraction—will be met. Note, however, that true recession is marked by a major and prolonged decline and is broad, harming employment, investment, and consumption.

While a technical recession may not be a true one, it is at least a warning sign. In fact, various indicators are pointing to further weakness ahead.

One such example is the IMEF Indicator for both the manufacturing and non-manufacturing sectors. Both have fallen below 50 points, indicating contraction.

January results for the IMEF indicator suggest that the economy is contracting

IMEF indicator, diffusion index

Source: Instituto Mexicano de Ejecutivos de Finanzas.

Mexicans face a challenging 2025 scenario. Things are always tough in the first year of a new administration, but, this time, additional headwinds are piling up:

• The transition in the U.S. administration, with Donald Trump beginning a second term, throws the Mexico–US relationship into question.
• The fiscal adjustment approved by Congress, which aims to narrow the deficit from 5.9% to 3% of GDP, implies weaker government demand for goods and services this year than last. Moreover, if the budget target isn’t met, Mexico’s debt could lose its investment-grade rating.
• Mexico’s 2024 “electoral stimulus” has faded by now.
• Rule of law is deteriorating because of recent judicial reforms. This has hurt the business climate, thus could discourage investment decisions.

[1] In the original, non–seasonally-adjusted figures.

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