Economic Activity Forecast:
According to BNP Paribas, Mexico’s economic activity is projected to contract by 0.3% this year and only manage a mere 0.2% growth in 2026.
Current Economic Climate and Opportunities
Pamela Díaz Loubet, the economist for Mexico at BNP Paribas, describes the current economic climate as “quite complex and generating uncertainty.” However, she also highlights that this situation presents opportunities for Mexico to redefine its long-term industrial policy.
- Government-Private Sector Relationship: The current economic climate has led to a redefinition of the relationship between the government and the private sector.
- Accelerated Industrial Policy Development: Mexico is expediting the development of its industrial policy, thanks to the prevailing economic circumstances.
Díaz Loubet explained that these developments have created more structured dialogue spaces, aiming to be more sectoral and productive with the private sector. This will help establish mechanisms for private investment to remain, grow, and adapt to changing conditions, such as those brought about by the tariff landscape.
Private Capital in Renewable Energy
Aurelien Nicolas, CEO and Director of BNP Paribas in Mexico, expresses optimism regarding the Mexican authorities’ willingness to incorporate private capital in renewable energy projects.
He noted that there are numerous investment capital sources worldwide eager to invest in renewable energy, including debt providers like BNP Paribas and equity providers such as funds, energy operators.
Interest Rate Projections
Díaz Loubet anticipates that Banco de México will set interest rates to a neutral level during the first half of the upcoming year.
Banxico, she estimates, lacks incentives to pause the interest rate reduction cycle. Consequently, another 50 basis points cut is expected for June, marking four consecutive adjustments of this magnitude. These adjustments would be announced in August, September, November, and December, with Banxico moderating each adjustment to 25 basis points during these meetings.
Key Questions and Answers
- What is the current economic outlook for Mexico? BNP Paribas forecasts a 0.3% contraction in economic activity this year and only a 0.2% growth for 2026.
- How is the current economic climate impacting Mexico’s industrial policy? The complex and uncertain economic climate presents opportunities for Mexico to redefine its long-term industrial policy, fostering better government-private sector relationships and accelerating industrial policy development.
- What is the outlook for private capital investment in renewable energy in Mexico? Aurelien Nicolas, CEO of BNP Paribas in Mexico, is optimistic about the Mexican authorities’ openness to private capital in renewable energy projects, with various investment sources available both domestically and internationally.
- What are Banco de México’s interest rate projections? Economist Pamela Díaz Loubet expects Banco de México to set interest rates to a neutral level in the first half of the upcoming year, with anticipated 50 basis points cuts in June, August, September, November, and December.
