Mexico Economy Grows 0.8% in 2025, Extends Slowdown Streak

Mexico’s economy grew 0.8% in 2025, according to final figures released by the National Institute of Statistics and Geography (INEGI). The definitive data revealed a stronger-than-expected close to the year, driven by a 0.4% monthly expansion in December and an upward revision of quarterly activity. While the result falls within the federal government’s target range of 0.5% to 1.5%, it marks the fourth consecutive year of decelerating growth following the post-pandemic rebound in 2021.

The final Gross Domestic Product (GDP) report—which incorporates complete economic surveys and administrative records 52 days after the end of the quarter—replaced the previous preliminary estimate of 0.7%. In 4Q25, GDP advanced 0.9% quarter over quarter and 1.8% compared with the same period in 2024.

“In general, the final GDP figure confirms that the Mexican economy resumed growth in the fourth quarter and that the year-end was slightly more dynamic than initially suggested by preliminary figures,” stated Kapital Grupo Financiero in a market analysis.

Sectoral Dynamics and Industrial Weakness

Growth in 2025 was supported primarily by the tertiary and primary sectors, which offset a contraction in industrial activity. Tertiary activities — encompassing commerce and services — recorded annual growth of 1.5%. These activities account for approximately two-thirds of Mexico’s GDP, making them the principal driver of aggregate performance.

Primary activities — including agriculture, livestock and forestry — expanded by 4% over the year. In December alone, the primary sector surged 6.5% compared with November, representing the strongest monthly dynamism among major sectors at year-end.

However, the secondary sector — which includes manufacturing, mining and construction — contracted by 1.1% between January and December 2025. Although secondary activities represent roughly one-third of GDP, their contraction weighed disproportionately on overall growth due to their linkages with exports and investment. 

Structural Growth Concerns

The 0.8% annual growth rate has renewed concerns among investment strategists about Mexico’s medium-term trajectory. Analysts at Bank of America Securities and Bx+ have pointed to a “chronic lack of growth,” noting that the current pace widens the gap between actual output and the economy’s estimated potential growth rate of around 2%.

Andrés Abadía, chief Latin America economist, Pantheon Macroeconomics, said year-end momentum reflected lagged monetary effects. “The year-end data was driven by the delayed impact of lower interest rates, the recovery of the Mexican peso and the moderation of inflation, which offset adverse internal and external factors,” Abadía said.

 Despite the stronger fourth quarter, economists warn that 2026 could begin on fragile footing. Alberto Ramos, economist, Goldman Sachs, projected that activity may face headwinds from “weak business confidence and the peak of the credit cycle.” He added that investment remains vulnerable to “domestic and external uncertainty, particularly regarding the direction of US trade policy and the review of the USMCA.”

Inflationary Pressures and the Food Basket

As the economy transitions into 2026, household consumption faces renewed pressure from essential goods. INEGI reported that annual headline inflation reached 3.8% in January 2026, while food prices continued to outpace the general index.

The cost of the basic food basket rose 5.1% annually in urban areas and 3.8% in rural areas. Several essential items recorded price increases well above headline inflation:

• Beef steak: up 17% annually

• Pasteurized cow’s milk: up 10.1% annually

• Food and beverages consumed outside the home: up 7.3% annually

In urban areas, meals consumed outside the home had the largest impact on food-basket inflation, while beef steak had the greatest incidence in rural regions. Soft drinks and lemons also ranked among the main contributors to monthly price variation in January.

Poverty Thresholds and Cost of Living

Persistent increases in protein and dairy prices have directly affected national poverty benchmarks. INEGI’s poverty lines — used to determine whether household income is sufficient to cover basic needs — were adjusted upward in early 2026.

In January 2026, the extreme poverty line — calculated solely on the cost of the food basket — was set at MX$1,863.1 (US$108.28) per person per month in rural areas and MX$2,486.4 in urban areas. The broader poverty line, which includes non-food items such as transportation, personal care and education, reached MX$3,465.7 in rural areas and MX$4,843.1 in urban centers. The urban threshold increased by MX$24.9 in a single month compared with December 2025.

Analysts suggest that if underlying inflation remains elevated and seasonal factors continue to influence pricing, pressure on essential goods could persist. For the retail and food service sectors, these dynamics signal sustained cost pressures and the potential for shifts in demand patterns, particularly as urban consumers adjust spending in response to higher prices for dining and staple proteins.