Mexico's Economic Outlook Brightens with Better Than Expected Growth Forecast for 2026

BBVA has revised its economic forecast for Mexico, upgrading the GDP growth projection for 2026 to 1.8%, up from the prior estimate of 1.2%. This improved outlook is supported by resilient consumption and a gradual recovery in investment, signaling positive momentum for the Mexican economy after a weak 2025.

The formal employment sector is expected to begin improving, which will further boost economic activity. Inflation trends are also becoming more favorable, with core inflation projected to resume its downward path starting in the second quarter of the year.

Key factors driving this positive outlook include the momentum from the fourth quarter of 2025, which saw 0.9% growth quarter-on-quarter, along with stronger-than-anticipated performance in both domestic demand and the external sector.

Manufacturing is anticipated to recover, particularly in industries linked to the development of artificial intelligence in the United States. This sector’s rebound will be a crucial factor in supporting overall economic growth.

Inflation is forecasted to moderate, with headline inflation expected to finish 2026 at 3.9%, and core inflation at 3.8%. Both measures are predicted to converge to 3.5% by 2027.

Monetary policy adjustments are also on the horizon, as Banxico is expected to resume cutting interest rates starting this month and continuing into May, which would bring the policy rate down to a terminal level of 6.50%.

The exchange rate is expected to experience a gradual and moderate depreciation, settling around 18.0 to 18.2 pesos per dollar by the end of 2026 and 2027, respectively.