BUENOS AIRES, Jan 17 (Reuters) - A Reuters poll of economists indicates that Mexico's economy is expected to remain sluggish in 2025, with concerns over potential changes in U.S. tariff and migration policies casting a shadow over the outlook.
Private spending and investment, already hampered by uncertainty and high interest rates, may see some uplift from targeted measures aimed at specific income groups and industrial sectors.
With anticipation surrounding U.S. President-elect Donald Trump's upcoming inauguration on Jan. 20, Mexicans are bracing themselves to see if his threat to impose a 25% tariff on cross-border goods materializes. Currently holding a free trade agreement with the U.S., Mexico is on edge.
Forecasting a 1.2% GDP growth for 2025 - down from 1.6% in the previous year - 32 economists polled from Jan. 9-16. highlight factors such as weakened private consumption, sluggish export performance, and reduced investment, partly due to U.S. political uncertainty and Mexico's domestic legislative challenges.
Pamela Diaz Loubet, Mexico economist at BNP Paribas, underscores that despite being a long-term possibility, political noise and investor caution are impeding expected capital inflows, essential for economic recovery.
As Mexico gears up to address the threat of U.S. tariffs under the new Biden administration, actions on illegal migration and drug trafficking are being signaled by President Claudia Sheinbaum's administration to allay U.S. concerns.
Moreover, in response to Trump's allegations of being a conduit for Chinese goods, Mexico has proposed measures to deter imports from China.
Even with the current government's emphasis on fiscal prudence and global bond yields trending upward, the poll suggests limited leeway for Mexico's central bank, Banxico, to aggressively ease monetary policy in a worst-case scenario.
Banxico, which reduced its benchmark rate to 10% from a peak of 11.25% in five gradual steps last year, is anticipated to further cut rates by 150 basis points to 8.50% by the end of 2025, as per median projections.
Discussing potential responses to new U.S. tariffs on Mexico, economists diverge on Banxico's course of action. While some advocate maintaining the current easing trajectory, others recommend a more restrained approach to prevent undesirable market repercussions.