Introduction to the FMI’s Updated Growth Forecast for Mexico
The International Monetary Fund (IMF) has revised its growth projection for Mexico’s economy to 1% for the current year, marking an increase from its previous estimate of 0.2% in July.
This new forecast is higher than the contraction of 0.3% estimated by the IMF in April and remains below the initial growth expectation of 1.7% set in January.
Resilient Exports Supporting Mexico’s GDP
According to the IMF mission’s preliminary conclusions, Mexico’s exports have demonstrated resilience, offsetting the weaknesses in domestic consumption and investment.
The mission explained that fiscal consolidation, restrictive monetary policy, and trade tensions with the United States have impacted consumption and investment.
They suggested that a further relaxation of monetary policy should be considered once it becomes clear that inflation is on track to reach the 3% target.
The IMF acknowledged that recent interest rate cuts have been appropriate but emphasized that additional reductions would require clear signals that underlying inflation and inflation expectations are on course to meet the 3% target precisely.
Export Strength Expected to Sustain Mexico’s GDP Growth in 2026
In these preliminary conclusions, the IMF mission highlighted that stronger-than-expected U.S. demand and resolution of trade uncertainty, possibly through a favorable T-MEC review or increased use of the trade agreement’s preferences, pose upside risks to projections.
For the upcoming year, they anticipate a 1.5% growth rate for Mexico’s economy, which is still lower than the 2% expected in January but higher than the 1.4% estimated in April and July.
The Mexican government projects that the GDP will grow between 1.8% and 2.8% in the next year, according to the General Economic Policy Criteria 2026 presented to Congress.
This implies that the economic team of Claudia Sheinbaum’s government expects a precise 2.3% growth rate during the second year of their administration, which diverges from the 1.5% projected by the IMF.
Strengthening Fiscal Consolidation and Tax Revenues
The IMF mission estimated that Mexico will not meet the government’s goal of reducing the fiscal deficit to 3.9% of GDP, as initially planned.
Although they acknowledged significant reductions in fiscal expansion from the previous administration’s last year, they project that it will end at 4.3% of GDP.
The mission stressed the need to “intensify efforts to ensure that public debt begins a downward trajectory.”
According to their calculations, the proposed deficit targets for 2026 and subsequent years in the 2026 budget law project would result in a sustained increase in the debt-to-GDP ratio, approaching 61.5% by 2030.
This would leave Mexico’s debt dynamics vulnerable to shocks, although the public debt remains sustainable with a high probability. Nevertheless, more ambitious and intense consolidation is needed during the initial phase to strengthen the credibility of fiscal plans.
Fortifying the Rule of Law
The IMF mission recommended addressing weaknesses against money laundering and crime fighting, as well as safeguarding the professionalism of the judicial system.
“Tackling crime, which remains a significant obstacle to growth, is essential,” they emphasized.
Within the context of the judicial reform, which they recognized involves a profound shift towards broader democratic participation, the mission stressed that safeguards ensuring transparency, professionalism, and accountability must be included.
These aspects are crucial for investor confidence, which will aid in transitioning from professional career-based appointments to a popularly elected system, similar to the one recently implemented.
Key Questions and Answers
- What is the IMF’s updated growth projection for Mexico’s economy? The IMF has revised its forecast to 1% for the current year, up from 0.2% in July.
- What factors have contributed to Mexico’s resilient exports? Despite weaknesses in domestic consumption and investment, Mexico’s exports have shown strength, compensating for these shortcomings.
- What growth rate does the Mexican government anticipate for the upcoming year? The government projects a growth rate between 1.8% and 2.8% for the next year.
- Why does the IMF suggest further monetary policy relaxation? The IMF recommends additional interest rate cuts once it’s clear that inflation is on track to reach the 3% target.
- What are the IMF’s recommendations for fiscal consolidation and debt management? The IMF urges intensified efforts to reduce public debt and ensure a sustainable debt-to-GDP ratio.
- What role does the rule of law play in the IMF’s recommendations for Mexico? The IMF emphasizes addressing money laundering weaknesses, safeguarding judicial professionalism, and ensuring transparency and accountability within the judicial system.
