Mexico's Economy Contracts More Than Expected, Recovery Could Hinge on World Cup

• Mexico's economy contracted 0.8% in the first quarter of 2026 from the 0.9% recorded in the previous quarter, preliminary data showed on Thursday, April 30, 2026. This marks the largest decline in a quarter since late 2024, and undershoots the 0.5% decline expected by economists in a Reuters poll. The weakness comes ahead of the June 2026 FIFA World Cup, which is expected to provide only a modest, temporary boost to economic activity.
• All sectors ​in Mexico's ⁠economy registered declines during the January-to-March period. The primary sector had the sharpest dip, down 1.4%. Secondary and tertiary activities, respectively covering manufacturing and services, declined 1.1% and 0.6% in ⁠a ​sequential basis. Compared with the same period a year earlier, ​growth in the first quarter was a modest 0.1%, below economists' expectations for 0.8%.
• According to Itau Chief Economist, Mario Mesquita, near‑term momentum remains subdued. ​However, a gradual recovery is expected, supported by firmer domestic demand and a ​modest boost from the 2026 FIFA World Cup soccer tournament.
• Itau estimates that the World Cup, which Mexico is co-hosting along with the United States (U.S.) ​and Canada, will add 0.1 percentage point to Mexico's annual Gross Domestic Product growth forecast at 1.1% ​for 2026, compared with growth in 2025 of 0.8%.
• Notwithstanding, analysts expect global trade tensions to weigh ‌on ⁠growth and to impact policy decisions by the Bank of Mexico, also known as Banxico. Notably, the Central Bank's decision in March to cut its benchmark interest rate by 25 basis points to 6.75% was divided, with board ​members signalling the need for greater caution. Capital Economics analysts said there is a strong case for a rate cut of 25 basis points at Banxico's meeting next week.

(Source: Reuters)