Mexico's economy shrinks amid external pressures

Mexico’s economy contracted by 0.8% in the first quarter of 2025, reversing a prior quarter’s growth of 0.9%. This decline was the steepest since late 2024 and fell below the Bloomberg survey’s median estimate of -0.6%. On an annual basis, GDP growth was minimal at 0.1%, weaker than expectations of 0.7% and a slowdown from the previously revised 1.6% growth rate. The downturn was driven by reduced activity in agriculture and manufacturing, with the services sector also declining. Economists note that a technical recession would require two consecutive quarters of negative growth, but the Bank of Mexico projects GDP growth of 1.4% in 2025, an improvement from the 0.5% expansion in 2024. Since Claudia Sheinbaum took office in late 2024, investment growth has weakened significantly, falling from around 2% year-on-year to -6% by the end of 2024. External pressures, including U.S. tariffs imposed by Donald Trump on Mexican exports and the ongoing Middle East conflict, have further strained the economy. Governor Victoria Rodríguez Ceja warned that these pressures could worsen growth prospects, especially as economic fragility resurfaces.