Central Bank Cuts Growth Outlook

Banxico has slashed its economic growth forecast for 2026, placing the midpoint estimate at 1.1 percent, according to the latest official reports.

The new forecast range sits between 0.5 and 1.7 percent. The narrower band reflects the central bank's cautious stance as it weighs a mix of domestic headwinds, including first-quarter GDP contraction, alongside external pressures stemming from renegotiations of the T-MEC (Mexico-US-Canada trade agreement) and turbulent global energy markets.

First Quarter Contraction Confirmed

Data from Mexico's statistics agency (Inegi) confirmed that first-quarter GDP contracted 0.6 percent relative to the previous quarter, an improvement from the preliminary reading of negative 0.8 percent.

By sector, primary activities fell 1.7 percent, secondary activities declined 1.0 percent, and tertiary activities dropped 0.4 percent.

Recovery Expected from Q2 Onward

Despite the weakness, Banxico projects the economy will return to positive growth beginning in the second quarter, supported by domestic consumption, public investment in priority projects, and the economic boost expected from the 2026 World Cup.

Governor Victoria Rodriguez Ceja's policy board cut the benchmark interest rate by 25 basis points in early month, bringing it to 6.50 percent, a move widely seen as the end of the monetary easing cycle.

Federal Government Pledges Stability

The federal administration has reaffirmed its commitment to macroeconomic stability, emphasizing fiscal discipline, infrastructure investment, and efforts to attract private capital through its national well-being hubs program. Officials view these measures as critical to gradually reversing the slowdown.

Sources