Our economic outlook for Mexico

October 17, 2024

Our outlook for year-end 2024

1.75%–2.25%

Economic growth,
year over year

Mexico’s GDP grew by 0.2% in the second quarter, up slightly from 0.1% first-quarter growth. Year-over-year growth slowed to 1.0%, down from 1.8% in the first quarter. We expect full-year growth in a range of 1.75%–2.25%. However, we’ll be watching for signs of restrictive policy rates weighing on consumption and fixed asset investment.

3.7%–3.9%

Core inflation, year over year

Core inflation has fallen steadily since the beginning of 2023. We expect that it will finish 2024 near the upper end of the 2%–4% target range set by the Bank of Mexico (Banxico), but we don’t foresee it falling to the 3% midpoint until late 2025. The last mile in the inflation fight is proving challenging, as strong wage growth from a tight labor market has buoyed spending, keeping services prices elevated. 

10%–10.25%

Monetary policy rate

On September 26, for the third time this year, Banxico cut its target for the overnight interbank rate by 25 basis points, to 10.5%. Banxico noted that “although the outlook for inflation still calls for a restrictive monetary policy stance, its evolution implies that it is adequate to reduce the level of monetary restriction.” Vanguard anticipates an additional 25 to 50 basis points of cuts in 2024, to a year-end range of 10%–10.25%, levels that would still be restrictive.1

2.5%–2.8%

Unemployment rate

The labor market remains robust, with year-over-year employment growth reaching its prepandemic average of 3.7%. The market’s strength continues to support strong wage growth. An unemployment rate near historical lows stands below what Banxico considers the nonaccelerating inflation rate of unemployment, or NAIRU, suggesting continuing upward pressure on wages and inflation.

What I’m watching


Consumption, investment, and moderating growth

After a solid 2023, we expect growth to moderate closer to trend. Consumer spending and investment have well recovered since their pandemic slump, supporting growth. We expect that consumption due to a strong labor market and investment due to nearshoring will be key positive factors in the short term. However, we expect high interest rates and net trade to offset some of the gains with a likely slowdown in external demand, especially from the U.S.


Vytas Maciulis

Vytas Maciulis,
Vanguard Economist

A stacked bar chart showing the components of Mexico’s GDP from the last quarter of 2017 through the last quarter of 2023. An overlaid line chart shows overall GDP year-over-year changes for the period through the first quarter of 2024, then Vanguard forecasts thereafter through year-end 2024. The charts show GDP within 3 percentage points of zero until it plunges to -20% in mid-2020 before gradually recovering, then spiking to more than 22% in mid-2021 before moderating to around 2% by year-end 2024.

Notes: GDP is the percentage change year over year. GDP components reflect contribution to year-over-year changes. 

Sources: Vanguard calculations using data from Refinitiv. GDP component data are through year-end 2023 and GDP data are through March 2024, with Vanguard forecasts thereafter.

1 A basis point is one-hundredth of a percentage point.

Notes: All investing is subject to risk, including the possible loss of the money you invest. 

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