Our economic outlook for Mexico
August 07, 2026
Growth to improve in 2027 despite near-term uncertainty
”Trade uncertainty remains a meaningful headwind for Mexico's economy, even as growth gradually improves.”
Thiago Ferreira,
Vanguard Senior Economist
We continue to expect the Mexican economic outlook to improve in 2027 on the back of a strong U.S. economy led by AI-related investment and productivity. Renewed tensions between the U.S. and Iran have increased volatility in energy markets, keeping oil prices above levels seen at the time of our previous update and contributing to near-term uncertainty. Still, Mexico’s exposure to the conflict is mainly indirect, operating through higher global energy costs—particularly refined petroleum products and natural gas—rather than through direct supply links to the region.
Demand from the U.S. should help offset Mexico’s recent lackluster domestic performance in the longer term. Despite mixed higher-frequency indicators, second-quarter GDP growth surprised slightly upward at a lukewarm 1.5%, quarter over quarter. Additionally, firms remain cautious as United States-Mexico-Canada Agreement (USMCA) negotiations continue beyond the original July 1 deadline. While current USMCA provisions remain intact, uncertainty surrounding the possibility of annual reviews and the eventual shape of a renewed agreement is likely to weigh on investment and business confidence.
Headline and core inflation improved a bit since last month, and we have accordingly nudged down our forecasts for this year and the next. Still, we expect disinflation to proceed gradually, as services and core inflation remain sticky and risks from trade disruptions, energy prices, and weather shocks remain tilted to the upside. Contained real wage growth and stable long-run expectations should help inflation further decline over time.
The Bank of Mexico (Banxico) maintained its policy rate at 6.5% in August, signaling that policymakers remain comfortable with the current policy stance. While inflation has moved in a favorable direction, policymakers continue to face a complex backdrop shaped by geopolitical risks, trade uncertainty, and mixed signals from the domestic economy. We expect the policy rate to remain at 6.5% through 2027 as Banxico waits for clearer evidence that disinflation is durable.
Mexico economic forecasts
Notes: GDP growth is defined as the annual change in real (inflation-adjusted) GDP in the forecast year compared with the previous year. Unemployment rate is as of December for each year. Core inflation is the year-over-year change in the Consumer Price Index, excluding volatile food and energy prices, as of December for each year. Monetary policy is the Bank of Mexico’s year-end target for the overnight interbank rate.
Source: Vanguard.
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