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Mexico, with its twelfth-largest economy by nominal GDP, finds itself at a crossroads. While the country is not facing significant danger or rapid growth, it will undergo a crucial test with the upcoming presidential elections on June 2, 2024. According to Oraculus, the current ruling party, Morena, is likely to retain power. However, this may come with challenges in fully controlling policy as regional governments and congressional seats could shift to the opposition. This political tug of war may lead to hesitancy in making changes and limited opportunities and risks.
Economically speaking, Mexico appears to be in a state of equilibrium. Inflation has shown decreased volatility since April 2023, particularly with core inflation. Deloitte predicts that Mexico will end the year with a 4.3% annual inflation rate, close to the current 4.7%, and likely to remain within the range of 4% to 5% for the next few years. As a result, the Bank of Mexico may not be able to significantly relax its monetary policy, with the benchmark interest rate expected to decrease from 11% to 9.75% in 2024 and 7% in 2025. Even with this decrease, Mexico’s interest rates will remain among the highest in Latin America, supporting the strong performance of the Mexican peso. The peso is expected to reach 17.60 pesos per dollar by the end of 2024 and 19.20 pesos per dollar in 2025, following an appreciation of 18% in recent years.
Despite these positive economic indicators, Mexico’s path to growth may be delayed without significant institutional reforms and productive investments. The focus will be on the upcoming general elections and transition period of new government approach towards economic policy along with US presidential elections at the end of year.
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