Economics: Indicators published in February point to a weak economic recovery for 2026, with inflation above Banxico's target and deteriorating public finances

MEXICO - Report 09 Mar 2026 by Mauricio González and Francisco González

Economic indicators published in February suggest that Mexico will experience a moderate recovery in 2026 following the stagnation observed in 2025, although this rebound is shaping up to be weak and constrained by multiple obstacles. Private consumption shows signs of gradual recovery, driven late last year partly by anticipation of tariff changes that translated into increased spending on imported goods. Meanwhile, gross fixed investment continues to contract, with pronounced declines in machinery, equipment, and non-residential construction—reflecting persistently low private investment for expanding productive capacity. This is taking place despite government announcements of infrastructure plans prioritizing railway transportation, which lack robust evaluation and accountability mechanisms. On the inflation front, challenges persist: core inflation remains above 4%, moving away from Banxico's short-term targets, while the non-core component could face additional pressures from rising energy costs stemming from geopolitical tensions.

Public finances continue to deteriorate, with a fiscal deficit exceeding the 2025 target and an increase in debt as a proportion of GDP—weakening payment capacity and complicating the stabilization expected for 2026 through spending cuts. In the external sector the Mexican economy benefited last year from resilient exports, maintaining its position as the leading supplier to the United States. However, uncertainty persists regarding global tariffs and the USMCA review.

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