International Monetary Fund has sharply reduced its growth forecast for Latin America in 2025. A steep decline in Mexico’s economy is responsible for almost the entire slowdown in the region.
The fund’s latest World Economic Outlook, released Tuesday, reduced its forecast for regional GDP growth to just 2.0% in 2019, compared with a forecast of 2.4% by 2024, and 2.5% in January.
The IMF’s updated report said that the major reason for the changes was a “large reduction in Mexico’s rating.”
The organisation cited “weaker-than-expected activity in late 2024 and early 2025, the impact of US-imposed tariffs, related uncertainty, geopolitical tensions, and a tighter financing environment” as reasons for the downgrade.
Mexico the Red
Mexico’s economy, which is the second largest in the region and the United States’ major trading partner, will likely decrease by 0.3% between 2025-2030.
The IMF had previously predicted a growth of 1.4%.
Due to its close economic relationship with the United States, Canada is vulnerable to changes in trade policies north of the border.
Recent increases in US tariffs have had an impact on Mexican exports. They are now at the highest levels in over a century.
It is expected that the contraction will have ripple effects in other parts of the world. Analysts say that the shock to Mexico’s economic system could cause supply chain disruptions, reduce investment and create uncertainty for neighbouring countries, especially those who have strong economic and immigration ties with Mexico.
Outlook mixed across the region
Mexico’s poor performance is expected to drag down the forecast for all of North America. However, its neighbors are likely to do better.
Brazil’s largest economy is expected to grow by 2.0% between now and 2025. This is a slight decrease from the 2.2% growth forecast in January, but with still good prospects.
The economy faces challenges such as high interest rates, low investment and a slowdown in growth.
Argentina is a bright spot in the world. IMF increased its forecast for growth to 5,5%, up from the previous 5.0%. The country is now beginning to stabilize after years of economic turmoil.
The sustainability of the growth is still uncertain due to ongoing fiscal pressures and inflationary forces.
Other countries in the region are expected to see modest growth, with Colombia forecasted at 2.4% and Chile 2.0%, while Peru is projected to be 2.8%. These figures reflect an overall cautious outlook, despite tight financial conditions in many nations and uncertainty over political issues.
Central America and Caribbean: Slow but steady
Central America will grow by 3.8% in 2025, down from the 3.9% growth projected for 2024.
The subregion is supported by strong remittances, tourism recovery, and economic links with the US, but the slowdown in the region has a negative impact.
The Caribbean’s growth is also expected to be slower in 2025, falling to just 4.2% from 12.1% in 2024.
IMF attributes last year’s boom to the post-pandemic rebound in tourism, noting that it is now returning at more normal levels.
The outlook is impacted by global headwinds
The weaker Latin American forecast is a part of the global recession. IMF has also reduced their 2025 growth forecast from 3.3% to 2.8%.
This downgrading is due mainly to the increasing US tariffs, and tightening of financial conditions which has dampened global trade and investment.
The IMF warned that the global environment is still challenging. The IMF warned that “the global environment remains challenging.”
Latin America is preparing for a slowdown in 2025. Policymakers will have to make difficult decisions: whether they want to maintain inflation or increase growth. Or, if they prefer, protect their economies against external shocks while implementing the necessary changes.
Mexico may have a challenging year as it navigates a turbulent and unpredictable world.
The post IMF lowers 2025 Latin American growth forecast due to Mexico’s weakness could be updated as new information becomes available
