Due to moderate investment and a slowing economy, as well as weakening domestic and external demand, BBVA Research revised its growth estimate for 2024 downwards, from 2.5% to 1.2 percent .

In its report “Mexico Situation”, the financial institution details that consumption shows its biggest drop since the beginning of the COVID-19 pandemic , due to the loss of dynamism in the real wage mass.

The document, released on Thursday, points out that investment is slowing down in the face of falling public spending , resulting from the completion of some flagship projects of the previous administration headed by Andrés Manuel López Obrador . It is also due to lower manufacturing activity , affected by the economic situation in the United States.

Given this, he estimated that the slowdown in investment will become more pronounced in the coming quarters, due to the uncertainty generated by the changes in the Judiciary.

BBVA Research pointed out a slowdown in the labor market with the creation of 464 thousand jobs during the third quarter of this year , although it predicts that in the same period of 2025 there will be moderate growth in formal employment, with 558 thousand jobs .

Among its forecasts for the Mexican economy, it indicates that general inflation has resumed its downward trend , which it expects will continue “going forward,” and indicated that the underlying inflation, which considers goods and services, will be below 4% in the fourth quarter of this year.

“We expect both to be below 3.5% by the end of 2025; we continue to anticipate that they will close this year at 4.8% and 3.8%, respectively,” he said.

Regarding monetary policy , the financial institution believes that there is ample room for it to normalize due to the favorable trend of underlying inflation and the weakening of domestic demand.

In this regard, it estimates that the monetary rate will close 2024 at a level of 10% , and 2025 at 7.50%, below consensus expectations, while it foresees that the exchange rate will close 2024 at 19.8 pesos per dollar .

It indicates that public debt will be around 50.8% of Gross Domestic Product (GDP) this year compared to 46.8% in 2023. “To keep this ratio constant from 2025 onwards, it will be necessary to reduce the public deficit to levels close to 2% of GDP.”

“The Bank of Mexico (Banxico) , BBVA said, has ample room to cut rates without pause in the face of lower inflation, fiscal consolidation, weakening domestic demand and the Fed’s rate-cutting cycle,” it said.

On September 18, the  Federal Open Market Committee (FOMC) of the  United States Federal Reserve cut the funding rate by 50 basis points (bp), which will place the rate between 4.75 and 5.00 points.

For various analysts in the sector, the Fed’s decision sends a message about the direction the economy is heading, which could affect our country due to the close trade relationship we have with our northern neighbor.

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