Mexico Economic Outlook. March 2026

Summary

We upgraded our 2026 GDP growth forecast to 1.8% (1.2% previously), supported by the sustained resilience of consumption and the anticipated gradual recovery in investment. After a weak 2025, formal employment begins to improve. We expect core inflation to resume its downward trend in the second quarter of the year.

Key points

• Key points:
• The improved outlook reflects the momentum from 4Q25 (0.9% QoQ), together with stronger-than-expected performance of both domestic demand and the external sector.
• Manufacturing is set to show signs of recovery going forward, supported by sectors linked to the development of artificial intelligence in the U.S.
• We forecast headline inflation to end 2026 at 3.9% (+0.1 pp relative to our previous forecast), with core inflation at 3.8%. We expect both to converge to 3.5% in 2027.
• We now expect Banxico to resume the rate-cutting cycle this month and continue it in May, which would bring the policy rate to a terminal level of 6.50%.
• We expect a gradual and moderate depreciation of the exchange rate, bringing it to around 18.0 and 18.2 pesos per dollar by the end of 2026 and 2027, respectively.

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