Mexico: 2024 Economic Overview

Striking a balance between controlling inflation and supporting economic growth will be essential.

As we step into the new year, all eyes are on the Mexican economy. After facing a rollercoaster of economic shifts in recent years, the North American nation is positioned for a period of crucial recovery and growth. Set to be a pivotal year with significant milestones, events will crescendo in summer elections that could produce a significant shift in the country’s trajectory.

Post-Pandemic Recovery

The COVID-19 pandemic has had a lasting impact on global economies, and Mexico is no exception. However, as the country settles into the post-vaccination period, the economy is expected to rebound in 2024. Mexico’s government expects the economy to grow by between 2.5% and 3.5% this year. Mexico is Latin America’s second-largest economy after Brazil. With businesses reopening and consumer confidence improving, sectors such as tourism, manufacturing, and services are likely to contribute significantly to the country’s economic recovery.

Trade Dynamics and the US-Mexico-Canada Agreement (USMCA)

The USMCA, which replaced NAFTA in 2020, has been a focal point for Mexico’s trade policies. In 2024, we can anticipate a more stable and consolidated implementation of the agreement, providing Mexican businesses with increased access to the North American market. Strengthening trade ties with the US and Canada will play a pivotal role in driving economic growth, especially for industries such as automotive, agriculture, and technology.

Infrastructure Investments

The Mexican government has outlined ambitious plans for infrastructure development, with a focus on transportation. Tren Maya is one of the most significant projects and went into operation ahead of schedule in December 2023. Tren Maya is an interoceanic rail corridor that aims to boost both economic and social development in the south of the country. Investment in such projects is expected to stimulate economic activity, create jobs, and enhance the overall competitiveness of the nation. Indeed, megaprojects have become a hallmark of the incumbent president’s tenure.

Inflation and Monetary Policy

Inflationary pressures have been a concern for the Mexican economy, and the central bank’s monetary policy will play a crucial role in managing these challenges in 2024. The forecast the central bank announced in November and its latest report showed average consumer price inflation ending 2024 on 3.2%.

Striking a balance between controlling inflation and supporting economic growth will be essential. Investors and businesses will closely monitor the central bank’s decisions to gauge the economic landscape and make informed decisions.

Digital Transformation

Embracing the digital transformation will be pivotal for Mexico’s economic evolution in 2024. The integration of technology in various sectors, including finance, healthcare, and education can enhance efficiency and productivity. The government’s commitment to fostering a digital ecosystem and encouraging innovation will likely attract further foreign investment and position Mexico amongst the most tech-savvy nations in the region. The government also has plans to boost e-government services, reducing bureaucracy. Plans include making birth certificates accessible online and a large free WiFi initiative.

Environmental Sustainability

Environmental concerns are gaining prominence on the global stage, and Mexico is again no exception. In 2024, we can expect increased emphasis on sustainable practices and green initiatives. The Mexican government’s commitment to addressing climate change and promoting clean energy solutions will likely shape policies and regulations, impacting businesses’ strategies and operations.

Events to watch

As Mexico navigates the complexities of 2024, a combination of global and domestic factors will shape its economic landscape. The post-pandemic recovery, effective implementation of the USMCA, infrastructure investments, inflation management, technological advancements, environmental sustainability efforts, and presidential elections will be critical aspects to watch. Presidents in Mexico serve a single six-year term and the incumbent, left-wing firebrand Andrés Manuel López Obrador, is likely to be replaced by fellow MORENA member and former cabinet minister Claudia Sheinbaum, who is leading polls. Xochitl Gálvez, running as an independent, trails in polls by over 25 percentage points, although there has been some narrowing in recent weeks. Were Galvez to emerge victorious, it would likely lead to a new phase of oil sector expansion.