Banner Leaderboard. An in-depth look at the Economic Outlook for 2025 from the Mastercard Economics Institute.

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Economic Outlook for 2025: Navigating a divergent global economy

As we approach the dawn of 2025, the global economics remains a complex web of opportunities and challenges. The Mastercard Economics Institute (MEI), a leading authority on economic trends, has released its highly anticipated ‘Economic Outlook 2025’ report, providing crucial insights into the forces shaping the year ahead.

This in-depth analysis sheds light on key trends, regional disparities, and potential disruptors, offering a vital roadmap for businesses, policymakers, and individuals navigating this evolving environment.

A modest global expansion, with regional divergence

The MEI projects a moderate pace of global economic expansion in 2025, driven by a combination of monetary and fiscal adjustments, though the impact will vary considerably across different countries and regions. This isn’t a uniform recovery; the world economy is experiencing a period of significant divergence. Understanding these regional nuances is critical for making informed decisions in the coming year.

Latin America: A region of contrasts

Latin America and the Caribbean (LAC) present a particularly compelling case study in this divergence. While the MEI anticipates overall modest economic expansion in the region, the report highlights significant variations among individual countries.

Brazil’s growth slowdown

Brazil’s economic growth is projected to decelerate in 2025, requiring careful navigation by policymakers.

Potential benefits for Chile and Colombia

Conversely, Chile and Colombia could experience positive impacts from the projected drop in interest rates, potentially providing a boost to their economic performance.

Policy uncertainty in Peru and Mexico

Peru and Mexico face headwinds in the form of policy uncertainty, requiring adaptive strategies and careful risk management.

Argentina’s rebound

Argentina is poised for a rapid economic rebound thanks to strong macroeconomic and microeconomic reforms.

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Inflation: The final mile challenge

The battle against inflation remains a critical focus across the globe. While most LAC countries have seen a deceleration in inflation rates, the final stretch to achieve targeted levels will likely prove challenging. This is compounded by the fact that services inflation has proven stickier than anticipated.

The ongoing convergence debate

The debate surrounding inflation convergence will persist in 2025, as countries strive to bring price increases under control.

Argentina’s progress

Argentina’s policy adjustments are expected to push its inflation rate down to 35% in 2025, a significant drop from the staggering 120% rate in 2024. Continued vigilance will be crucial.

Fiscal sustainability: A key consideration

Fiscal policies are taking centre stage, and their effectiveness will be crucial in driving economic stability and sustainable growth.

Brazil’s balancing act

Brazil faces a considerable fiscal sustainability challenge, requiring strategic policy decisions to ensure a healthy macroeconomic balance.

Mexico’s social spending

Mexico’s new administration will have to balance heightened social spending and fiscal consolidation while identifying new sources of income.

Colombia’s tax reform

Colombia is projected to pursue continued discussions on tax reform, impacting its future fiscal outlook.

Argentina’s long-term challenge

Argentina, while having made strong fiscal adjustments, faces the challenge of ensuring long-term fiscal stability.

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Global factors: Trade, China, and the US

Global events and policy shifts will have a profound impact on the economic outlook for 2025.

US shift from China

The US shift in focus from China towards other regions could create new trade opportunities for countries in Latin America, potentially benefiting Mexico in particular.

The impact of US trade policy

Ongoing discussions regarding US trade policy will likely impact Mexico’s economy through both trade and remittances.

China’s growth challenges

A slowdown in China’s growth could present challenges for countries in LAC more closely tied to the Chinese economy, such as Brazil, Chile, and Peru. This highlights the interconnectedness of the global economic system.

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Global trends shaping the economic landscape

The MEI report identifies several global trends that are expected to influence economic activity in 2025.

Digital transformation

Innovation and digitalisation are poised to play an even greater role in empowering consumers, particularly in the retail sector. As interest rates decline and inflation stabilises, demand for durable goods is predicted to surge.

The shifting landscape of travel

Cost-conscious consumers are seeking value and unique experiences in travel, and are gravitating towards lesser-known destinations that offer similar appeal. This is fuelling growth in hotel transactions in regions previously overlooked by the mainstream tourist trade.

Consumer spending patterns

Consumer spending is showcasing a dualistic trend, where a need for affordability is balanced against demand for luxury goods, particularly in markets like Mexico. This duality reflects the complex interplay of inflation, purchasing power, and consumer preferences.

The power of remittances

Remittances remain a vital economic lifeline, particularly in Mexico and Central America. Digitalisation is crucial to further drive down costs and frictions associated with financial flows and to continue to boost consumption and resilience.

Women in the workforce

Women are leading the workforce recovery in many Latin American countries. This has been fuelled by new opportunities in areas such as healthcare and education, as well as the increased flexibility offered by remote work. This trend should continue to support economic growth in the region by boosting household income and reducing demographic pressures.

Rising trade tensions

The rise in global trade tensions represents both risks and opportunities. While protectionist policies can create challenges, they can also drive a shift away from dependence on any one trading partner.

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Navigating uncertainty: Key takeaways

The “Economic Outlook 2025” report from the Mastercard Economics Institute provides a crucial lens through which to assess the complex landscape of the global economy. Several key takeaways emerge:

Regional diversity

Economic performance in 2025 will vary significantly across regions and countries. It’s crucial to look beyond global averages and focus on local specifics.

Fiscal discipline

Fiscal policies will play an outsized role in shaping economic outcomes. Sustainable fiscal management is crucial for both stability and long-term growth.

Inflation management

Taming inflation remains a key priority. Policymakers will face a difficult task of balancing efforts to control price increases without stifling economic expansion.

The power of technology

Digitalisation and innovation will serve as catalysts for growth, impacting everything from retail to financial services.

Global interconnectedness

The global economy is deeply interconnected, and events in one region can have ripple effects in others. This requires a global perspective and an understanding of geopolitical forces.

Adaptability and agility

Businesses and policymakers must be adaptable and agile to navigate the evolving economic landscape. This requires continuous monitoring, quick response times, and a willingness to adapt to changing conditions.

The economic outlook for 2025 presents a picture of uneven progress and significant challenges. While modest expansion is anticipated, it is imperative to recognise the nuanced regional variations and diverse global influences.

The MEI’s “Economic Outlook 2025” offers valuable insights that can help businesses, governments, and individuals navigate this complex environment successfully. With its detailed analysis of key trends, this report provides a crucial framework for anticipating future developments and making informed decisions.

By understanding the interconnectedness of global economic forces and regional specificities, leaders will be best equipped to leverage opportunities and mitigate risks in 2025 and beyond.

Disclaimer: This article is based on the provided press release (posted below) and should not be considered financial or investment advice. It’s recommended to consult with financial professionals for specific guidance.

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Official press release

Mastercard Economics Institute highlights growth divergence in Latin America in 2025

MEI projects modest economic expansion for LAC in 2025.
Fiscal policy will continue to be a central focus, as inflation rates are projected to decrease to 35% in 2025, lower than the 120% experienced in 2024.
Mexico and Central America will face potential impacts from changes in US trade and migration policies

Miami, FL. December 17, 2024. The Mastercard Economics Institute (MEI) released its annual ‘Economic Outlook 2025’ report, shedding light on key trends and challenges expected to shape the global economy in the coming year. For Latin America and the Caribbean (LAC), MEI projects modest economic expansion – driven by monetary and fiscal recalibrations but with variations within each country.

Brazil’s growth is set to slowdown while Chile and Colombia may benefit from lower interest rates. Policy uncertainty could weigh on growth in Peru and Mexico, but Argentina should benefit from strong macroeconomic and microeconomic reforms, leading to a rapid growth rebound.

The convergence debate around inflation will remain active. While inflation has been decelerating in most LAC countries, the final mile to reach the inflation target will likely challenge countries in 2025. Goods inflation has decelerated in most countries on the region, but services inflation has proved stickier than expected in most countries.

MEI expects innovation and digitalisation to empower consumers across the LAC region, particularly in the retail sector. Declining interest rates and stabilised inflation are forecast to drive demand for durable goods such as electronics, furniture, and appliances. While the pent-up demand for experiences is tapering, spending on significant life events remains strong.

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Inflation and fiscal sustainability

Peru’s inflation is at desired levels, while Mexico, Colombia and Chile are still in the process of convergence, with inflation hovering around 4% and aiming for 3%. Brazil, though, has been seeing inflation diverging from target.

In Argentina, the ongoing disinflation process is expected to continue as policy adjustments take effect. MEI projects inflation at 35% in 2025, down from 120% in 2024, with risks skewed toward even lower inflation. Inflation remains a key indicator of success, and the pace of convergence will guide the next steps in fiscal and monetary policy.

Fiscal sustainability

In Brazil, fiscal sustainability challenge has been critical part of the macroeconomic balance. In Mexico, the incoming administration faces the challenge of balancing increased social spending with fiscal consolidation, potentially requiring new revenue sources.

Colombia is expected to continue tax reform discussions, while Chile maintains a more balanced fiscal policy. Argentina has made strong fiscal adjustments but faces the challenge of ensuring long-term sustainability.

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Global factors and regional implications

The region could benefit from the US shift in focus towards China Mainland. While Mexico will likely be part of ongoing discussions about US trade policy, the emphasis on reducing China Mainland’s importance could, after some negotiations, be beneficial to Mexico and other countries in the region. However, global exposure of the region and social pressure against fiscal adjustments could hurt growth prospects.

China Mainland’s growth challenge, coupled with US policy discussions on trade and migration, could impact different countries in the region differently. Brazil, Chile and Peru are more closely connected to China Mainland, while Central America and Mexico are more tied to the US). Policy changes in the US could affect Mexico and Central American countries through trade and remittances. In Mexico, changes to the judicial system may also negatively impact business confidence.

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Global trends to watch in LAC (Latin America and the Caribbean)

Pricing priorities: Travel twins and apparel market shifts

In line with the global trend, Latin America is witnessing a shift in travel preferences as cost-conscious consumers look for alternatives to popular destinations. Mastercard Economics Institute highlights “travel twins” like Bacalar in Mexico, emerging as a more affordable and less crowded alternative to Tulum. These trends reflect how travellers in the region are prioritising value and unique experiences, fuelling higher hotel transaction growth in lesser known but equally attractive locations.

Consumer spending patterns in Latin America highlight a balance between value and luxury. While mass-market apparel continues to dominate across the region, Mexico stands out as an exception, where luxury spending is gaining momentum, driven by higher-income segments. This duality reflects the region’s economic dynamics, where inflation pressures lead most consumers to prioritise affordability, while targeted segments drive selective growth in premium categories.

Migration and remittances

Remittances remain a cornerstone of economic stability in Latin America, particularly in Mexico and Central America. In 2023, 95% of remittances to Mexico came from the US, providing critical support for lower-income households.

As global remittances are projected to grow by 3% in 2024-2025, digitalisation will play a pivotal role in reducing costs and frictions, ensuring that these financial flows continue to boost consumption and economic resilience across the region.

The SHEeconomy

Women are leading the workforce recovery across Latin America. In countries like Chile and Mexico, female labour participation has increased significantly, fuelled by job creation in sectors like healthcare and education and the rise of remote work opportunities. This trend is crucial for supporting economic growth in LAC, as greater female workforce inclusion helps offset demographic pressures and boosts household incomes.

Trade tensions

Latin America faces both risks and opportunities amid rising global trade tensions. As the US considers increasing tariffs on imports, Mexico remains at the centre of the discussion due to its heavy reliance on US trade and the upcoming USMCA renegotiation.

While new barriers could pose challenges, Mexico and other LAC economies could benefit from efforts to reduce dependence on Chinese Mainland imports by capturing nearshoring opportunities. For commodity-driven economies like Chile and Peru, slower Chinese Mainland demand may present downside risks in 2025.

MEI’s Economic Outlook 2025 uses public and proprietary data sets, including aggregated and anonymised Mastercard sales activity, and models estimating economic activity. Additional reports and insights from MEI can be found here.

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About the Mastercard Economics Institute

The Mastercard Economics Institute provides insights into global and local economic trends using advanced analytics and Mastercard’s proprietary data assets. Established in 2020, MEI supports businesses, governments, and policymakers with economic monitoring services and timely analysis on economic themes including consumer spending, retail and travel trends, and other local and global barometers of economic performance. MEI offers valuable perspectives to inform decision-making and promote sustainable growth worldwide through our thought leadership series, and through Mastercard’s specialised product offerings.

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