Mexico’s Modest Growth in Early 2025 Masks Deeper Economic Strains

Mexico’s economy narrowly avoided a technical recession in the first quarter of 2025, according to preliminary data from the national statistics agency INEGI.

The country’s gross domestic product grew 0.2% from the previous quarter, following a 0.6% contraction at the end of 2024. On an annual basis, the economy expanded by 0.6% in seasonally adjusted terms and 0.8% in non-adjusted terms.

Most of this growth came from a sharp rebound in the agricultural sector, which grew 8.1% quarter-on-quarter and 6% year-on-year. This surge followed a period of weakness and helped offset continued declines in industry and stagnation in services.

The industrial sector, which includes manufacturing, mining, and construction, contracted by 0.3% from the previous quarter and 1.4% year-on-year.

Services, which account for more than 60% of Mexico’s GDP and employ nearly half the workforce, showed no growth compared to the previous quarter and only a 1.3% annual increase.

The agricultural sector, despite its strong performance, represents just 3.4% of the economy. Its volatility and limited scale mean it cannot drive sustained national growth.

Mexico’s Fragile Recovery

Meanwhile, the industrial sector’s weakness reflects deeper issues. Manufacturers increased production ahead of new U.S. tariffs on Mexican goods, but this effect is expected to fade as tariffs fully take hold.

Uncertainty over U.S. trade policy has already slowed investment and prompted importers to bring forward orders, artificially boosting export figures in the short term.

The service sector’s stagnation signals broader caution among consumers and businesses. Analysts warn that the risks of recession remain high. The consensus forecast for full-year 2025 GDP growth has dropped to 0.5%, down from 1.5% in 2024 and 3.3% in 2023.

Inflation edged up to 3.9% in March, and the peso strengthened slightly, but these shifts have not translated into stronger domestic demand. Mexico’s Q1 performance shows resilience, but the underlying story is one of fragility.

Temporary gains in agriculture and pre-tariff exports mask persistent weakness in industry and services. Without stronger investment and clearer trade prospects, growth will likely remain subdued through the year.