Mexico could be in recession by 2025

MEXICO - The Mexican economy will enter into recession this year and will lose its Investment Grade before 2027, projected the founding director of the Institute for the Americas at George Washington University, Alejandro Werner.

He argues his estimate on the evidence of each change of six-year terms. According to him, each change of government usually subtracts about two points of Gross Domestic Product (GDP) from growth, due to a contraction in spending or the redesign of public programs.

On this occasion, the economic panorama faces many other elements that weaken its capacity for growth, said Werner. These are the impact of the constitutional reforms on investments, particularly that of the Judiciary, the very high interest rate that the country has, as well as the possibility that tariffs on the products it sells to the United States will materialize, with the entry of Donald Trump.

“It was a mistake to take the interest rate to such high levels and now that we are facing the one of recession in 2025, we have to lower them,” he pointed out.

Participating in a round table discussion at the Economic Perspectives Seminar of the Instituto Tecnológico Autónomo de México (ITAM), Werner opened his participation by warning that what worries him most for Mexico are the changes, the domestic route that the country is taking.

Werner, who was director of the Western Hemisphere Department at the International Monetary Fund (IMF) between 2013 and 2021, said that if he could recommend a policy to Mexican economic authorities to face the international environment, it would be to accompany the rate normalization cycle with a strategy that injects US$100 million into the foreign exchange market to face the shock that is coming during the next US government.

The also former official of the Treasury and the Bank of Mexico acknowledged that the previous president, Andrés Manuel López Obrador, stood out for the fiscal discipline with which the government operated, except in the last year of his administration.

Werner considered that López Obrador applied an unnecessary fiscal expansion that left a high inheritance to his successor, with a historic fiscal deficit and inertial spending pressures that make the implementation of a fiscal reform urgent, he said.

"In the absence of such a reform, Mexico will lose its Investment Grade before 2027," he said.