Mexico's Economic Outlook Emerges as Top Risk: Banxico

Banxico’s latest report shows that 84% of financial system executives identify slowing economic growth as Mexico’s leading domestic financial vulnerability, reflecting mounting concerns over the country’s outlook. Against a backdrop of global economic uncertainty, inflation risks, and rising protectionism, the shift in sentiment has heightened scrutiny of Mexico’s fiscal and sovereign credit profile. In response, financial institutions and regulators are strengthening anti-money laundering controls and expanding technical cooperation with the United States to reinforce the resilience of the financial system.

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Risk perception regarding Mexico’s economic growth has intensified over the past six months among financial system executives, according to the latest Financial Stability Report released by Mexico’s central bank (Banxico).

The report found that the share of respondents identifying a deterioration in the country’s economic outlook as a major risk increased from 78% to 84% among the 110 financial sector participants surveyed. As a result, concerns over domestic economic prospects now rank as the top internal financial vulnerability identified by the central bank.

Beyond domestic factors, Banxico warned that a potential slowdown in global economic activity remains a significant external risk. Political, geopolitical, and social contingencies ranked as the leading non-financial threats. Banxico Governor Victoria Rodríguez Ceja attributed the shift in growth expectations to persistent international macroeconomic uncertainty, highlighting protectionist policies and the possible weakening of international trade agreements as key sources of concern.

Financial institutions also expressed growing concern over monetary conditions. The proportion of respondents expecting inflation to exceed current forecasts increased from 77% to 80%, while concerns over disorderly movements in foreign interest rates rose from 54% to 64%.

The weakening growth outlook has also affected expectations for Mexico’s fiscal position. The percentage of respondents identifying risks to the country’s sovereign credit rating climbed from 64% to 75%. Despite the increase, Rodríguez Ceja emphasized that Mexico continues to maintain investment-grade ratings from the three major international credit agencies.

“The same agencies recognize that the Mexican economy can absorb shocks,” Rodríguez Ceja said, adding that the country’s macroeconomic fundamentals continue to provide a solid anchor for financial stability despite a challenging global environment.

The governor also addressed regulatory resilience, noting that Mexico’s financial system has strengthened its anti-money laundering (AML) and counter-terrorist financing frameworks. The measures follow compliance-related disclosures by US authorities in 2025 involving three Mexican financial institutions. In response, local regulators expanded technical communication channels and enhanced cooperation with their US counterparts.

“We have put the focus of attention on the level of risk of the clients,” Rodríguez Ceja said, adding that Banxico continuously reviews prevention and compliance processes to reduce operational vulnerabilities and safeguard the financial system.

Financial Institutions Forecast Sub-1% Growth

Reflecting the heightened risks outlined by Banxico, Scotiabank, Mifel, and seven other major financial institutions have revised their macroeconomic forecasts and now expect Mexico’s economy to expand by less than 1.0% in 2026.

According to the Citi Macroeconomic Expectations Survey published on June 5, 2026, the downward revisions reflect a tighter federal fiscal consolidation strategy and continued weakness in public-sector capital spending.

Scotiabank Mexico projects GDP growth of 0.7%—the most pessimistic estimate among the 35 participating institutions–while the market consensus stands at 1.1%. Natixis, Oxford Economics, Santander, XP Investments, Bank of America, Bradesco, and Masari also forecast growth below the 1.0% threshold.

If the 0.7% forecast materializes, Mexico’s average annual economic growth over the past five years would fall to 1.9%, below its historical average of 2.1%.

Analysts also highlighted a widening gap between official fiscal projections and private-sector estimates. While the Ministry of Finance (SHCP) projects a fiscal deficit of approximately 3.6% of GDP, market consensus places the figure above 4.0%, with some estimates approaching 5.0%.

Scotiabank warned that “given the high sensitivity of public finances to changes in growth and interest rates, any negative deviation could quickly translate into an additional deterioration of the fiscal balance.”

Mifel expects Mexico’s economy to grow 0.8% in 2026, citing trade uncertainty ahead of the upcoming review of the United States-Mexico-Canada Agreement (USMCA). The institution also pointed to recent actions by the Office of the United States Trade Representative, which announced tariffs ranging from 10% to 12.5% on products linked to forced labor concerns.

Mifel forecasts Mexico’s current account deficit at 0.4% of GDP in 2026 and 0.5% in 2027.