As the year draws to a close, the market anticipates that 2025 will end with a stagnant economy and inflationary pressures, along with a less positive outlook for the next year, thus moving away from government expectations. This estimate is reflected in the latest Banco de México (Banxico) survey of private sector specialists published this Monday, showing another adjustment to the GDP forecast to 0.39%, down from 0.50% estimated a month earlier. The adjustment comes after Banxico cut its forecast for Gross Domestic Product (GDP) growth to just 0.3%, moving away from the forecast of the Ministry of Finance and Public Credit (SHCP), as it falls below the lower estimated range of 0.5% (with an upper estimated range of 1.5%). It also comes after it was learned that the third quarter of the year contracted by 0.3% due to a collapse in industrial activity, and the few data already available for the fourth quarter do not show a recovery. Furthermore, although a better economic performance is expected for 2026, they also made a slight adjustment, as they now estimate that GDP will grow by 1.29% from the 1.32% they anticipated in October. Market expectations also challenge Banxico's targets, as they estimate that general inflation at the end of the year will be 3.75%, above the 3.5% estimated by the central bank. Moreover, they propose a more challenging scenario for 2026, the year in which Victoria Rodríguez's team promises to bring inflation back to 3%, however, the market anticipates even higher inflation this year at 3.92%. The adjustment comes amid a debate over the credibility of the central bank's targets raised at its last meeting, where Deputy Governor Jonathan Heath warned that cutting interest rates could damage perception among analysts. The survey also indicates that the central bank will end the year with another interest rate cut by Banxico of 25 basis points, bringing it to 7%. Regarding exchange rate forecasts, the market estimates that by the end of this year it will be at 18.71 pesos per dollar and the following year at 19.81 units.
