Mexico Sees Budget Deficit Lower In 2026 As Growth Ticks Up, Despite Uncertainty

  • Mexico expects its budget deficit to fall slightly in 2026 to 4.10%, as GDP growth is projected to increase, the finance ministry said during the government's budget presentation.
  • The deficit is expected to close 2025 at 4.32%, while the government maintains a pledge to support social programs and provide financial backing for state-owned oil company Pemex, which carries a significant debt load.
  • Finance Minister Edgar Amador said, "Although the international environment still presents risks stemming from uncertainty and trade tensions, it also opens up opportunities that we must seize." The government forecasts Latin America’s second-largest economy to expand between 1.8% and 2.8%, an increase of 1.3 percentage points on both ends of the range. This projection is higher than both the IMF’s growth forecast of 1.4% in 2026 and the Bank of Mexico’s most recent forecast of 1.1%.
  • The ministry also placed its inflation forecast for the end of 2026 at 3.0%, in line with the Bank of Mexico’s target, which is expected to be reached by the third quarter of next year. Along with a slowdown in inflation, the ministry anticipates a more accommodative monetary policy stance. The Bank of Mexico's benchmark interest rate is projected to close at 7.25% in 2025, 75 basis points lower than previously expected, and to decline further to 6% by 2026. Last month, the rate was lowered by 25 basis points to 7.75%, its lowest in three years.
  • In terms of state-owned enterprises, Pemex is projected to receive 263.5Bn Mexican pesos (US$14.14Bn) in 2026 to help meet debt and loan payments.
  • The budget proposal also indicated that Mexico’s General Import Tax will be reviewed in 2026 to support national development, including potential tariffs on countries such as China that do not have a trade agreement with Mexico. In addition, the draft budget announced new excise taxes aimed at discouraging consumption of certain products, like soft drinks, video games, and nicotine pouches.

 (Source: Reuters)