Banxico Raises Its 2026 Growth Forecast, but Pushes Inflation’s Return to 3% Back to 2027
The central bank sees a slightly better 2026 due to base effects, but warns that disinflation will be slower because of persistent pressures in services.
The Bank of Mexico (Banxico) raised its point forecast for 2026 GDP growth to 1.6%, up from the previous 1.1%, while also pushing back its estimate for headline inflation to converge to the 3% target until the second quarter of 2027. This dual adjustment—higher expected growth, but more time to normalize prices—reflects a somewhat more dynamic end to 2025 than anticipated, though with an inflation path that remains challenging, particularly due to the persistence of core inflation.
According to its October–December 2025 Quarterly Report, the GDP revision is largely driven by an arithmetic effect: because higher growth was observed in 2025 (0.6% versus the 0.3% previously estimated), the “base” for 2026 is higher and the calculation for the following year is revised upward. Banxico placed its 2026 growth range between 1.0% and 2.2%, a band consistent with moderate performance and with risks tilted toward weaker expansion.
The central bank described a scenario in which private consumption would continue to gain traction gradually, supported by the labor market and the overall wage bill, though with signs of cooling compared with recent years. Externally, it expects exports to show moderate momentum, in line with the evolution of U.S. industrial production, a key driver for Mexican manufacturing integrated into regional supply chains.
The most lagging component, in Banxico’s assessment, would be investment. The central bank expects weakness at least through the second half of 2026, tied to uncertainty about the trade relationship with the United States and the USMCA review process, as well as bouts of global financial volatility and geopolitical tensions. In the bank’s view, the combination of business caution, potential regulatory changes, and the sensitivity of trade-intensive sectors could keep capital spending below its potential.
On inflation, the most significant change is the delay in convergence to 3%: Banxico now estimates that goal would be reached until the second quarter of 2027, three quarters later than projected in the previous report. The shift is explained by higher and more persistent readings in core inflation—especially in services—and by the impact of recent fiscal adjustments, which tend to pass through to prices gradually.
Although Banxico said the balance of inflation risks looks more balanced than in previous episodes, it still sees an upside bias. Among the factors that could complicate the price path, it cites the persistence of core inflation, cost pressures, a possible depreciation of the peso, disruptions from geopolitical conflicts or trade policy decisions, as well as climate shocks that affect agricultural products and put pressure on non-core inflation.
Investment, the USMCA, and the Link to the United States: the Main Focus for 2026
Banxico’s assessment puts investment as the missing gear needed to accelerate growth in a sustained way. Mexico enters 2026 with structural advantages tied to supply-chain relocation (nearshoring), its manufacturing integration with the United States, and its export base; however, realizing that potential depends on certainty for projects, the availability of infrastructure, and competitive conditions in energy, logistics, and security. The proximity of the USMCA review adds another layer of caution: for the auto, electronics, electrical equipment, and agribusiness sectors, any adjustment to rules of origin, dispute panels, or trade measures could influence investment decisions and expansion plans. In that sense, a stable negotiating environment and clear signals in favor of private investment could tilt the balance toward the upper end of the growth range; by contrast, episodes of trade friction or abrupt rule changes would tend to reinforce the downside bias the central bank underscores.
Looking ahead to the coming quarters, the combination of moderate growth and slower disinflation poses a challenge for monetary policy: sustaining the disinflation process without unnecessarily worsening the slowdown. Exchange-rate behavior, developments in services (rent, education, restaurants, transportation, and other components with more inertial price-setting), and U.S. economic activity will be key variables for validating—or adjusting—the new timeline for convergence to 3%.
In perspective, the report suggests the Mexican economy is not facing a baseline contraction scenario, but rather a cycle of contained expansion, with investment as the main variable for improvement and inflation easing, albeit more slowly than expected. Banxico’s central message is that growth could improve marginally due to statistical carryover, but the price challenge will continue to dominate Mexico’s economic conversation through 2027.
