GDP grows at robust pace in the first quarter

Economy remains strong despite slowdown: GDP growth slowed markedly to 0.8% on a seasonally adjusted quarter on quarter basis in the first quarter from 2.0% in the fourth quarter of last year. This was the weakest result since Q2 2024 but still elevated by historical standards. The economic recovery remains well on track thanks to lower inflation plus reforms to boost competition and reduce the government’s economic footprint. In year-on-year terms, the economy grew 5.8% in Q1, more than double Q4’s 2.6% and likely one of Latin America’s strongest readings.

Broad-based expansion: Household spending growth fell to 2.9% in Q1 (Q4 2024: +4.2% s.a. qoq). Public spending contracted 0.1% in Q1 (Q4 2024: +0.2% s.a. qoq). Meanwhile, fixed investment growth fell to 9.8% in Q1 (Q4 2024: +12.3% s.a. qoq). On the external front, exports of goods and services contracted 1.5% in Q1, hurt by the strong peso in real terms (Q4 2024: +6.2% s.a. qoq). Conversely, imports of goods and services growth picked up to 17.7% in Q1 (Q4 2024: +15.1% s.a. qoq) as import restrictions were eased.

Panelist insight: On the outlook for 2025 as a whole, EIU analysts said: “Real GDP will register strong growth in 2025 owing to a firm recovery in fixed investment and exports amid higher output growth in the mining and energy sectors. Private consumption will partly recover as disinflation causes real wages and pensions to rise, but an uneven labour market recovery with high levels of informality will prevent a faster recovery. Easing credit conditions and a more supportive business environment will boost private investment, which is especially helpful for real estate investment that will in turn support the lagging construction sector that has been hard hit by the government's drastic cuts to public works projects. Strong domestic demand growth will cause imports to rise, which will act as drag on growth. Government consumption will grow slowly as the government pursues aggressive fiscal savings.”

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