After a year characterised by both domestic fiscal restraint and global instability, Mexico’s economy concluded 2025 with a stronger-than-expected recovery, providing policymakers with some respite.
The Instituto Nacional de Estadistica y Geografia, (INEGI), released data on Monday showing that the Gross Domestic Product (GDP) grew 0.9% in comparison to the third quarter.
It was also slightly above the original estimate of 0.8% and the economists’ forecasts.
The second largest economy in Latin America is likely to gain momentum as we move into the year 2026.
Surprise in the Fourth Quarter
Mexico’s GDP will grow by 0.8% seasonally adjusted in 2025. This is slightly higher than the initial 0.7% projection by INEGI.
The figure, although modest, reflects the resilience of Mexico, its largest trading partner and tighter financial circumstances.
El Financiero reports that the recovery in the fourth quarter was primarily driven by the services sector and stabilisation of manufacturing exports which were uneven in earlier years.
Analysts cited by The outlet stated that despite high borrowing costs domestic spending was stable.
The December activities indicate widespread activity
Separate INEGI data show that economic activity in the month of December grew 0.4% compared to November. This was above expectations and a recovery after a 0.1% decline during the preceding month.
All three major sectors, namely services, industries, and agriculture, have seen significant growth in the past month.
The breadth of the recovery suggests that it was not limited by a single engine.
According to the Mexican newspaper El Economista, the services sector, accounting for the majority of the GDP, has benefited from increased retail sales as well as an increase in tourist traffic during Christmas.
Construction and auto manufacturing also helped to sustain the industrial output.
The December data is a welcome improvement after inconsistent results in the first three quarters. It adds further evidence that the economy has gained traction late in the calendar year.
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Mexico has benefited from a convergence of factors.
The domestic market is robust: Despite rising interest rates, the consumer has been able to maintain their spending due to inflows of remittances and an essentially tight labor market.
* Stabilisation of exports: At the end of the year manufacturing exports, particularly those for automobiles and electronic products, showed an increase in activity.
Construction activity continued to be supported by public works and infrastructure projects.
Business Daily Expansion reports that economists view nearshoring – or the movement of supply chains to be closer to America – as a structural tailwind. However, its impact on GDP will not be immediate, but rather gradual.
The economists caution that one high reading does not guarantee a continuing trend and that data for quarterly can be unpredictable.
Policy context
These more robust numbers come at a crucial time for fiscal and monetary policies.
Banco de Mexico has maintained a relatively strict monetary policy to combat inflation. This is true even though price pressures are lower than they were in the past.
In the case of stronger economic growth, it may be more difficult to determine the pace and timing of rate changes.
If the economy continues to grow faster than expected, officials should be cautious in order not to rekindle inflationary pressures.
It is important that the administration find a balance between expectations of market participants for fiscal restraint, and commitments to social spending and infrastructure.
Stronger growth could open up more revenue, but it depends on many factors.
The post Mexico’s GDP grows by 0.9% in Q4, exceeding estimates, may be updated as new information becomes available.
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