Cabinet changes, and expectations of greater dynamism this year
Economic performance in 2025 was weak. But the combination of government agenda prioritization efforts and signs of stronger growth toward yearend has fostered official optimism about economic activity for 2026.
GDP growth for 2025 is estimated at 2.2%, less than half the 5% rate recorded in 2024, while inflation climbed to 4.95%, close to the upper boundary of the target range. Despite heightened intra-year volatility, the peso depreciated by 4.08% in 2025, less than in 2024. The current account deficit narrowed, supported by strong exports and remittances growth, as well as by a contraction in imports related to lower oil prices and weakened domestic demand. Preliminary fiscal information suggests compliance with the budgeted deficit target, although real capital spending remained below its 2024 level.
Incipient signs of reactivation began to emerge toward the end of 2025, particularly in November, when economic activity saw its highest y/y growth rate of the year. The fall in interest rates and the expansion of liquidity in H2 2025 signaled a gradual transmission of monetary easing to the real economy, albeit with lags, in a context still characterized by weak investment and subdued cumulative growth.
The external environment in 2026 is expected to be somewhat more supportive. But the scope for domestic monetary easing will remain constrained by U.S. monetary policy, as U.S. Federal Reserve decisions limit local policy space, since wider interest rate differentials might lead to capital outflows and currency pressure. Domestically, the beginning of 2026 was marked by a relaunch of the government agenda, with changes in the cabinet and redefinition of priorities, although without any explicit reference to tax reform, which leaves uncertainty over the medium-term fiscal framework that may affect private investment decisions.
Against this backdrop, our projections point to economic growth of around 3.5% in 2026, higher than in 2025 but still below both the official projection of 4.5% and the economy’s potential growth rate of 5%. Inflation is expected to move closer to the target, while the external sector is expected to remain favorable. Overall, 2026 is shaping up to be a year of moderate optimism, amid prevailing uncertainties.
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