Mexico lowers 2025 growth forecast to still rosy 1.5%-2.3%

MEXICO CITY (Reuters) -Mexico's government sees its economy growing between 1.5% and 2.3% this year, down from a prior estimate of 2.0% to 3.0%, a draft budget from the country's finance ministry showed on Tuesday.

The growth forecast, which the finance ministry called conservative, is rosier than estimates by the private sector and Mexico's central bank and comes amid concerns that Mexico is on the precipice of a recession.

The finance ministry forecast economic growth of between 1.5% and 2.5% in 2026.

Latin America's no. 2 economy, shaken in recent months by cooling investor confidence, U.S. tariff threats and a prolonged drought, shrank in the fourth quarter and again in January. A first-quarter contraction would plunge Mexico into a technical recession.

In a statement, Mexico's finance ministry attributed the downward revision of the 2025 growth forecast to weaker residential investment and supply shocks that have persisted since late last year.

"Additionally, business caution driven by uncertainty over U.S. trade policy is also a contributing factor," the statement added.

The autonomous Bank of Mexico in February forecast the economy in 2025 could shrink by as much as 0.2% or expand by as much as 1.4%.

Earlier on Tuesday, private sector analysts polled by Mexico's central bank lowered their average growth forecast for the year to just 0.5%.

The finance ministry said it sees domestic consumption, job creation, and investments in strategic sectors as sustaining growth this year.

Mexico's economy has been a headache for President Claudia Sheinbaum, who inherited the country's highest budget deficit since the 1980s when she took office in October, but has resisted calls for deep fiscal reform.

Tuesday's budget document, which is used by lawmakers to plan future spending, also sees Mexico's budget deficit between 3.9% and 4.0% this year before falling to between 3.2% and 3.5% in 2026.

Annual inflation, according to the draft, is expected to end the year at 3.5%, within the central bank's target of 3%, plus or minus one percentage point, and slightly down from the annual rate of 3.77% recorded in February.

For 2026, the draft budget predicts that inflation will further ease to 3.0%.

The finance ministry sees Mexico's peso trading at 20.0 pesos per dollar at the end of this year, and slightly strengthening to 19.7 next year.

Average crude oil production this year is forecast at 1.762 million barrels per day (bpd), rising to 1.775 million bpd in 2026.

(Reporting by Anthony Esposito; Writing by Brendan O'Boyle; Editing by Sarah Morland, Emily Green and Muralikumar Anantharaman)