Mexico Sees 2.4% GDP Growth in 2027 Amid Fiscal Tightening

Mexico’s Ministry of Finance and Public Credit projects 2.4% GDP growth for 2027, underpinned by a fiscal consolidation strategy that includes a 4.1% reduction in public spending to offset a 26.8% drop in oil revenues. The shift toward “fiscal normalization” is seen as key to stabilizing public debt and achieving a 1.1% primary surplus, following years of slowing growth and structural industrial contraction.

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The Ministry of Finance and Public Credit (SHCP) projects Mexico’s economy will grow 2.4% in 2027, according to its General Economic Policy Guidelines submitted to Congress. The forecast represents a marginal improvement from the 2.3% expected in 2026, but comes alongside a stricter fiscal stance marked by a 4.1% cut in public spending and a sharp 26.8% drop in oil-related revenues.

The 2027 framework reflects the administration’s effort to stabilize public finances after several years of subdued growth. Authorities anticipate a “tighter” fiscal environment, with net budget expenditure estimated at MX$10.02 trillion (US$538 billion), down MX$91 billion (US$5.1 billion) from the 2026 approved budget.

A key driver of this adjustment is the projected decline in oil income. Revenues are expected to fall by MX$293.4 billion (US$16.5 billion), as the average price of Mexican crude is forecast at US$54.7 per barrel in 2027, compared with US$77.3 estimated for late 2026. To compensate, the government plans to increase tax collection by MX$347.7 billion (US$19.5 billion), maintaining revenues at 15.6% of GDP.

The fiscal strategy aims to strengthen macroeconomic stability. The SHCP targets a primary surplus of 1.1% of GDP in 2027, up from 0.5% in 2026, while Public Sector Borrowing Requirements (PSBR) are projected to decline to 3.5% of GDP. “The fiscal normalization process will continue, ensuring a sustainable debt path without undermining growth potential,” the agency stated.

Slow Growth Backdrop Shapes Outlook 

The projected recovery follows a weak 2025, when Mexico’s economy expanded just 0.8%, marking a fourth consecutive year of deceleration. Growth remained below both the country’s estimated 2% potential and its long-term average of 1.8% between 2000 and 2018.

Sectoral performance highlighted structural constraints. Primary activities, including agriculture, grew 4%, while services expanded 1.5%. However, a 1.1% contraction in secondary activities — manufacturing, construction and industry — offset these gains. Given that these sectors account for 63.3% of GDP, their decline significantly weighed on overall performance.

Momentum improved slightly toward the end of the year. Economic activity grew 0.9% quarter over quarter in the final quarter of 2025. Andrés Abadía of Pantheon Macroeconomics attributed the rebound to “lagged effects from lower interest rates, a stronger peso and easing inflation.”

Looking ahead, inflation is expected to converge to Mexico’s Central Bank (Banxico) target of 3% by 2027, down from 3.7% projected for late 2026. The exchange rate is forecast to close 2027 at MX$18.60 per dollar, while short-term interest rates (Cetes) are expected to decline to 5.5%.

Private consumption remains a central pillar of the outlook, supported by social programs and real wage growth. Nevertheless, fiscal constraints will persist as authorities aim to reduce the Historical Balance of Public Sector Financial Requirements (SHRFSP) to 55% of GDP.

External Pressures Cloud the Outlook

At the 89th Banking Convention in Cancún, Victoria Rodríguez Ceja, Governor of Banxico, warned that global uncertainty continues to pose risks to inflation and growth. She pointed to geopolitical tensions, disruptions in trade routes and shifts in US trade policy as key sources of volatility.

A major risk factor is the upcoming review of the United States-Mexico-Canada Agreement (USMCA). As Mexico strengthens its position as the United States’ leading trading partner—with exports reaching US$44 billion—any revisions to the agreement or new tariff measures could significantly impact the outlook.

“Volatility persists in a context shaped by geopolitical conflicts and the USMCA review process,” the SHCP noted. Rodríguez added that while external risks remain elevated, stronger US economic performance could provide some upside.

Meanwhile, Larry Fink, CEO, BlackRock, warned that oil prices could surge to US$150 per barrel and trigger a global recession if disruptions in the Strait of Hormuz continue.

Despite these challenges, Mexico’s authorities highlight the resilience of the domestic financial system. Credit to the private sector has recovered steadily, with commercial bank lending expanding under controlled risk conditions.