Economics: Risks intensify on multiple fronts
Mexico faces an adverse external environment, with oil prices remaining elevated following the US-Iran conflict, reigniting global inflationary pressures and prompting the Fed and the European Central Bank to resume rate hikes. This compounds risks for a Mexican economy marked by structural deceleration: average GDP growth fell from 1.9% to 1.0% annually over the past twenty-five years, with manufacturing and services contracting during the first half of 2026, weak productive investment, formal employment declining 0.3% annually, and consumption growing modestly while remaining concentrated in imported goods. The stickiness of core services inflation limits Banxico's room to continue cutting rates, just as the Fed's recent hike further narrows an interest rate differential already below its historical average, raising the risk of capital outflows.
On public finances, the broad deficit (PSBR) would stand at 4.8% of GDP in 2026 according to our estimates, above the official target of 4.1%, while the 3.9% target for 2027 rests on optimistic revenue assumptions and understated spending, leading us to project 4.6% with a growing debt balance—prompting rating agencies to assign negative outlooks close to the investment-grade threshold.
The strongest counterweight is the external sector: non-oil exports are growing robustly, driven by artificial intelligence servers shipped to the United States—which could overtake the automotive sector as Mexico's leading export product—and by a trade surplus that explains the peso's recent strength. This momentum depends on preserving Mexico's tariff advantage in the USMCA review, a negotiation facing stricter automotive regional content requirements and allegations of Chinese goods transshipment. Accordingly, we project growth of 1.3%-1.4% for 2026-2027, sustained by exports, amid domestic, fiscal, and external risks.
Regarding this week's indicators, it was reported that demand for goods and services grew 5.7% annual real in the second quarter (Q2) of 2026, up from 5.3% in the first quarter (Q1), driven primarily by the export sector's momentum.
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