Mexico is expected to experience a modest economic recovery in 2026, with GDP growth projected to reach 1.6%, following a slowdown in 2025 that saw expansion of just 0.4%—a notable decline from the 1.2% recorded the previous year. The 2025 downturn was driven by tariff tensions, a fragile business climate, and reduced foreign direct investment (FDI), which weighed on consumer spending and job creation. Government spending cuts and investor caution also contributed, leading to a 3.3% year-on-year drop in industrial activity by September 2025, with construction falling 7.2% and manufacturing down 2.3%. n nDespite these headwinds, certain sectors maintained momentum through the third quarter, including agriculture, retail trade, business support, and professional, scientific, technical, health, and real estate services. Private consumer spending was further constrained by a 5.5% decline in remittance inflows, which totaled US$45.7 billion through September 2025 compared to the same period in 2024. Lower FDI also discouraged hiring, particularly in manufacturing, where job losses reached 249,000 by September. Formal job creation from January to October totaled 550,800 positions—7.4% fewer than in the same period of 2024. n nInflation remained within Banco de México’s 2% to 4% tolerance band from January to October. It is expected to close the year at 3.8%, primarily influenced by core inflation components. The exchange rate is projected to average 18.80 pesos per dollar by December, representing a 1% appreciation from January 2025. The peso strengthened over the year due to Mexico’s competitive interest rates, relative public debt stability, and a broadly weaker U.S. dollar. n nLooking ahead, the 2026 outlook hinges on the resolution of trade uncertainties, particularly surrounding the USMCA agreement, which is scheduled for review on July 1, 2026. As these concerns ease, delayed investment is expected to resume, supporting nearshoring initiatives and stimulating activity in manufacturing and construction. Additionally, the central bank’s interest rate-cutting cycle is expected to encourage investment and job creation. The benchmark rate is projected to close 2025 at 7%, with further reductions in 2026 potentially bringing it to around 6.5%. n nInflation is forecast to remain near 3.8% by the end of 2026, driven by noncore components that have persisted through 2025. The U.S. dollar may regain strength in early 2026, but renewed investment—especially through nearshoring—and a relatively attractive interest rate environment among emerging markets should help stabilize the exchange rate at approximately 18.70 pesos per dollar by year-end. n nNonetheless, several risks could affect the recovery, including a fiscal deficit exceeding 4.1% of GDP, continued declines in remittances, uncertainty over nearshoring momentum, and the possibility of a major renegotiation of USMCA—all of which could dampen growth prospects. n— news from Deloitte
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Global economic outlook 2026
Mexico n n– Daniel Zaga and Erika Peralta n nThe Mexican economy will most likely close 2025 with an economic growth rate of 0.4%, representing a notable decline compared with the 1.2% recorded in 2024. Factors such as tariff tensions and an uncertain business climate affected foreign direct investment (FDI), domestic consumer spending, and consequently, job creation. Likewise, the contraction in government spending and investor caution led to a 3.3% decline in industrial activity in September 2025 versus a year ago, driven by a 7.2% drop in construction and a 2.3% decline in manufacturing during the same period. In contrast, productive sectors such as agriculture, retail trade, business support, and professional, scientific, technical, health, and real estate services boosted GDP dynamism through the third quarter of the year. n nPrivate consumer spending was also constrained by the reduction in remittance inflows, which stood at US$45.7 billion through September 2025, representing a 5.5% decrease compared with September 2024. Additionally, the lower FDI inflows discouraged job creation, particularly in the manufacturing sector. n nFrom January to October, cumulative formal job creation reached 550,800 new positions, or 7.4% less than the amount recorded during the same period in 2024. Meanwhile, job losses in manufacturing totaled 249,000 through September of this year. n nInflation remained within Banco de México’s tolerance band of 2% to 4% between January and October. By year-end, inflation is expected to reach 3.8%, mainly driven by goods and services prices that make up core inflation. Likewise, the exchange rate is expected to close December at an average level of 18.80 pesos per dollar, which implies a 1% appreciation compared with January 2025. It is worth noting that throughout the year, the peso strengthened against the US dollar due to factors such as Mexico’s competitive interest rate, the relative stability of public debt, and the generalized weakness of the dollar. n nLooking ahead to 2026, the economy is expected to see a recovery, with GDP growth reaching 1.6%, as the uncertainty generated by tariff tensions dissipates, particularly given that the USMCA’s six-year review is due to take place on July 1, 2026. In this context, investment postponed during 2025 is expected to bolster nearshoring and stimulate the manufacturing and construction sectors. Additionally, the interest rate–cutting cycle implemented by the central bank is expected to encourage investment and job creation in 2026. By December 2025, the benchmark rate is expected to close at 7%, while further cuts in 2026 could bring it to around 6.5%. n nInflation is expected to end 2026 at around 3.8%, driven by noncore inflation, which has persisted through 2025. As for the exchange rate, the dollar will likely attempt to regain strength in the first half of 2026. However, the recovery of investment—particularly through nearshoring in the medium term—along with an interest rate that remains competitive among emerging economies, would allow the exchange rate to end next year at approximately 18.70 pesos per dollar. n nMexico nevertheless faces several risks, including an increase in the fiscal deficit above 4.1% of GDP, lower remittance inflows, uncertainty regarding the performance of nearshoring, and the possibility of a profound renegotiation of the USMCA—factors that could weigh on GDP growth.