Banxico Raises Mexico Growth Forecast to 1.5%: What Changed?

The outlook for the Mexican economy has seen a slight shift. Banco de México (Banxico) has raised its growth forecast for Mexico’s Gross Domestic Product (GDP) in 2026 from 1.1% to 1.5%. This revision reflects a more robust recovery in economic activity during the second quarter of the year.

However, the adjustment does not signal that the central bank anticipates accelerated growth for Mexico. On the contrary, Banxico maintains a cautious assessment, where the economy is advancing but still exhibits slack conditions and several risks that could limit performance in the coming months.

According to the April-June 2026 Quarterly Report, the projected range for GDP growth this year has moved from 0.5% to 1.7% to a range of 1.0% to 2.0%. The new point forecast of 1.5% sits squarely in the middle of this estimate. For 2027, Banxico made a marginal downward adjustment, revising its forecast from 2.1% to 2.0%, while keeping the growth range practically unchanged, now set between 1.2% and 2.8%.

Why Did Banxico Raise Its Growth Forecast for Mexico?

The primary change stems from the performance of economic activity during the second quarter of 2026. After a contraction in the first three months of the year, the Mexican economy managed to rebound between April and June. Banxico noted that the growth observed during this period exceeded its previous forecast, which is the main reason behind the upward revision of its annual projection.

The institution also highlighted that the second-quarter expansion saw positive contributions from all three major economic activity aggregates. Nonetheless, it cautioned that accumulated productive weakness persists over an extended period. In simpler terms, Mexico began 2026 with less dynamism, but the second-quarter recovery partially altered the year’s picture.

The key elements behind this new assessment include:

A stronger-than-anticipated recovery in the second quarter. National economic activity expanded following the contraction recorded in the previous quarter.
Gradual recovery in private consumption. Banxico expects consumption to resume a positive trajectory for the remainder of 2026, after the weakness observed at the start of the year.
Improved performance in some productive sectors. The second-quarter recovery saw positive contributions from the main components of economic activity.
A domestic financial environment with some favorable signals. During the analyzed period, government interest rates decreased, and the Mexican peso appreciated against levels observed at the close of March.
Expectation of continued exports. Banxico anticipates moderate expansion in Mexican exports, supported by demand for goods linked to the U.S. industrial sector.

Therefore, the adjustment is not based on an expectation of an economic boom. It is a correction acknowledging that the Mexican economy had a better second quarter than anticipated. Banxico Governor Victoria Rodríguez Ceja explained that despite this reactivation, the output gap estimate remains in negative territory. Likewise, Banxico maintains the expectation that slack conditions will prevail over the forecast horizon. This means Mexico’s productive capacity would still have room to absorb a recovery without necessarily generating significant price pressures.

What About Investment?

One of the most significant contrasts in the new scenario lies between consumption and investment. Banxico anticipates a progressive recovery in private household consumption for the rest of the year. This forecast assumes that the weakness observed at the beginning of 2026 will be replaced by a more positive trend.

Investment, on the other hand, faces a much more complex scenario. Banco de México considers that gross fixed investment will remain weak due to uncertainty related to the commercial relationship between Mexico and the United States, as well as the new phase of annual reviews of the United States-Mexico-Canada Agreement (USMCA).

Banxico specifically acknowledges that reduced trade uncertainty could generate a more favorable environment for investment in Mexico. Conversely, escalating trade tensions could curb business decisions and affect both consumption and investment.

USMCA, the United States, and Inflation: Factors That Could Alter the Scenario

Although Banxico has raised its growth forecast for Mexico in 2026, the central bank has not eliminated the risks that could modify this expectation.

Indeed, the balance of risks for growth remains skewed downwards. The USMCA holds a significant place within this scenario.

The United States has activated the annual review mechanism of the trade agreement, prolonging uncertainty about the future of North America’s economic relationship. However, Banxico also recognizes a favorable element in that negotiations between the countries are ongoing, and Mexican exports to the United States under the USMCA maintain preferential treatment.

For Mexico, the outcome of these discussions will be decisive.

Factors that could drive growth above forecasts include:

A more favorable evolution of the USMCA annual reviews.
An eventual ratification of the trade agreement.
Reduced uncertainty regarding U.S. trade policy.
Stronger U.S. economic growth than anticipated.
Increased execution of infrastructure projects through mixed investments.

However, the scenario also presents five clear downside risks:

Increased trade uncertainty, especially from U.S. economic policy decisions and the USMCA annual review.
Geopolitical conflicts, which could affect global trade, commodity prices, and economic activity.
Financial volatility, in both Mexican and international markets.
Slower economic growth in the United States, a situation that would impact external demand for Mexican products.
Meteorological phenomena, such as hurricanes, droughts, or extreme temperatures, capable of affecting various productive activities in the country.