IMF Staff Country Reports

This paper discusses Mexico’s 2024 Article IV Consultation and Review under the Flexible Credit Line (FCL) Arrangement. Economic activity is moderating due to binding capacity constraints and restrictive monetary policy. Inflation pressures are receding, with inflation expected to reach its 3-percent target by 2025. Economic activity is moderating, with private consumption and investment decelerating, and employment growth is slowing. A frontloaded fiscal consolidation, underpinned by well-identified measures, is needed to preserve fiscal sustainability. Monetary restraint should be removed gradually. Securing sustainable and inclusive growth will require a broad set of reforms. The Mexican economy is decelerating and inflation pressures are receding. Notwithstanding the procyclical fiscal expansion in 2024, monetary policy has been successfully calibrated to reverse the upswing in inflation and the authorities are planning a sizeable front-loaded fiscal consolidation for 2025. Mexico continues to qualify for the FCL by virtue of its very strong fundamentals and institutional policy frameworks and track record of economic performance and policy implementation. The authorities intend to continue to treat the arrangement as precautionary.