Challenges for Mexico’s Economy Until 2026
José Manuel Xirinachs, the Executive Secretary of the Economic Commission for Latin America and the Caribbean (CEPAL), has identified three significant risks facing Mexico’s economy as it advances towards 2026. These risks include low growth capacity, limited private investment dynamics, and weak productivity.
Historical Context of Mexico’s Economy
Over the past two decades, Mexico’s average annual economic growth has hovered around 2%. However, CEPAL now projects a mere 1.3% expansion for Mexico’s GDP in 2026, surpassing their previous forecast of 0.4% for the current year.
Xirinachs highlighted that Mexico’s low productivity growth has even regressed, further widening the gap relative to its primary trading partner, the United States.
Improving Business Environment
To stimulate private investment, Xirinachs emphasized the need for a stable business environment. He pointed out that Mexico’s fixed capital formation, measured as gross capital formation plus changes in inventories, has consistently accounted for approximately 23% of the GDP. This figure contrasts with the global average of around 26%.
- Suggested improvements include enhancing transportation and communication infrastructure, developing a skilled workforce strategy, and promoting competitive public services.
- These measures would foster a business-friendly environment, driving growth.
Xirinachs also proposed active policies promoting productive development in sectors and regions with high potential. He acknowledged that the current Mexican government, through Plan México, is promoting Polos de Desarrollo Económico para el Bienestar (PODEBIS) as federal-driven industrial and productive ecosystems to stimulate regional economic growth.
Strengths: Stable Prices, Export Dynamics, and Poverty Reduction
Among Mexico’s strengths, Xirinachs mentioned price and currency stability, a dynamic export sector, and poverty reduction.
- He projected that inflation would remain within the Banco de México’s target range (3% with a tolerance margin of one point in both directions).
- The Mexican peso is expected to maintain its strength against the US dollar.
- Despite international uncertainty, exports will continue to drive Mexico’s economic growth.
- Mexico will also stand out for its poverty reduction efforts, with official figures indicating that 13.4 million people escaped poverty between 2018 and 2024.
Key Questions and Answers
- What are the main economic challenges facing Mexico until 2026? Low growth capacity, limited private investment dynamics, and weak productivity.
- What is Mexico’s average annual economic growth over the past two decades? Around 2%.
- What is CEPAL’s current GDP growth projection for Mexico in 2026? 1.3%.
- How has Mexico’s productivity growth fared recently? It has regressed, widening the gap relative to the United States.
- What measures does Xirinachs propose to stimulate private investment in Mexico? Creating a stable business environment, enhancing infrastructure, developing skilled workforce strategies, and promoting competitive public services.
- What are Mexico’s key economic strengths? Price and currency stability, dynamic export sector, and poverty reduction.
