Bank of Mexico lowers 2026 economic growth forecast to 1.1%

MEXICO CITY: The Bank of Mexico lowered its growth forecast for Mexico’s economy this year to 1.1%, from a previous estimate of 1.6%, according to its quarterly report published on Wednesday.

Banxico, as the Bank of Mexico is known, said the downward revision for 2026 growth was driven primarily by a “considerably weaker” performance in the first quarter of this year.

While the bank expects the economy to continue expanding at a moderate pace, it warned that investment is likely to remain weak until at least the second half of 2026 due to ongoing uncertainty surrounding trade relations with the US and the upcoming review of the USMCA trilateral agreement between Canada, the US and Mexico.

“We continue to anticipate that economic activity will resume a growth path,” Bank of Mexico Governor Victoria Rodriguez told reporters on a conference call, adding that the USMCA review is fundamental for investment to resume an upward trend.

“We are expecting private consumption to show a positive trend and that external demand will continue to contribute to the growth of our exports, as has been observed so far.”

The US Trade Representative’s office earlier on Wednesday said it will kick off the first of three negotiating rounds with Mexico this week to revamp the trilateral trade agreement, but made no mention of any talks with Canada.

Uncertainty around the impacts of the Iran war and a sluggish economy weighed heavily on the Bank of Mexico’s decision to cut the country’s interest rate earlier in May.

Banxico’s board voted 3-2 to lower its benchmark interest rate by 25 basis points to 6.50% and announced an end to its easing cycle that began in early 2024.

The split vote highlighted diverging views within the board regarding inflation trends in Latin America’s second-largest economy.

Despite the growth cut, Banxico left its fourth-quarter 2026 projections for headline and core inflation unchanged at 3.5% and 3.4%, respectively.

The bank expects headline inflation to converge to its 3% target by the second quarter of 2027.

The central bank also slightly adjusted its 2027 growth outlook to 2.1%.

المصدر: Free Malaysia Today