Scotiabank, Mifel Cut Mexico 2026 GDP Outlook

Nine major financial institutions have lowered Mexico’s 2026 GDP growth forecasts to below 1.0%, citing fiscal consolidation, weak public investment, and mounting trade uncertainties. The increasingly bearish outlook contrasts sharply with the Ministry of Finance’s (SHCP) budget assumptions, raising concerns over the country’s fiscal trajectory as market consensus points to a deficit exceeding 4% of GDP. At the same time, looming USMCA renegotiations and new U.S. forced labor tariffs ranging from 10% to 12.5% are expected to intensify regulatory and operational pressures on export-oriented manufacturers and cross-border supply chains.

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Scotiabank, Mifel, and seven other major financial institutions project that Mexico's economy will expand by less than 1.0% in 2026, reflecting growing concerns over fiscal consolidation and weakening public investment. According to the Citi Macroeconomic Expectations Survey published on June 5, 2026, the downward revisions stem from a complex federal fiscal adjustment process and persistent weakness in public sector capital expenditure.

According to the Citi survey, Scotiabank Mexico forecasts annual GDP growth of 0.7%, the lowest estimate among the 35 participating institutions. The consensus forecast stands at 1.1%. In addition to Scotiabank and Mifel, Natixis, Oxford Economics, Santander, XP Investments, Bank of America, Bradesco, and Masari also project economic growth below the 1.0% threshold for 2026.

When combined with Mexico's real GDP growth over the previous four years, fulfillment of Scotiabank's 0.7% forecast would result in an average annual economic growth rate of 1.9% over the five-year period, below the country's historical average of 2.1%.

Scotiabank's economics team noted that recent revisions to the fiscal outlook point to an increasingly challenging environment for public finances and Mexico's sovereign credit profile, as structural constraints — including rigid public spending commitments and rising debt-servicing costs — continue to offset the country's underlying economic strengths.

The bank also warned of a widening gap between market expectations and government fiscal assumptions. While the Ministry of Finance and Public Credit (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%.

According to Scotiabank, the divergence reflects an optimistic macroeconomic framework embedded in the federal budget, particularly regarding economic growth assumptions. "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," the institution stated.

Mifel forecasts 0.8% real GDP growth for 2026, citing elevated trade uncertainty ahead of the upcoming review of the United States-Mexico-Canada Agreement (USMCA). External risks have intensified following an announcement by the Office of the United States Trade Representative introducing tariffs of between 10% to 12.5% on products associated with forced labor concerns, a measure that could affect segments of Mexican supply chains.

Mifel emphasized that maintaining stable and cooperative trade relations with the United States remains critical for Mexico's medium-term economic outlook. The institution added that growth differentials between the two economies are reflected in the United States' larger current account deficit, while projecting Mexico's current account deficit at 0.4% of GDP in 2026 and 0.5% in 2027.

OECD and Banxico Lower Growth Expectations

Joining the nine financial institutions projecting growth below 1.0% is the Organization for Economic Co-operation and Development (OECD), which revised its 2026 GDP forecast for Mexico downward to 0.8% in early June, a reduction of 0.5 percentage points from the 1.3% estimate published in March 2026.

According to the OECD, the downgrade reflects weaker domestic demand, persistent trade uncertainty, the effects of US tariffs, and escalating geopolitical tensions in the Middle East. The OECD's outlook is considerably more conservative than the federal government's projections. The SHCP continues to forecast 2.3% GDP growth in 2026, while private-sector analysts surveyed by Banxico in May lowered their estimate for a third consecutive month to 1.10%, down from 1.38%, and adjusted their 2027 expectations to between 1.78% and 1.80%.

Despite the weaker near-term outlook, the OECD slightly improved its 2027 growth forecast from 1.7% to 1.8%, citing lower interest rates and continued resilience in the labor market. By comparison, the SHCP projects 2.4% growth in 2027, while Banxico expects 2.1%.

Economic activity weakened across the manufacturing, agricultural, and services sectors at the start of 2026. Although household consumption moderated amid slower formal job creation, domestic demand remains the principal driver of economic activity. The OECD expects lower interest rates to gradually support private investment but cautioned that the recovery will likely remain modest due to persistent domestic and global political uncertainty.

Meanwhile, public spending and investment continue to face constraints under the federal government's fiscal consolidation strategy, which aims to reduce the budget deficit to below 4% of GDP. To strengthen macroeconomic stability, the OECD recommended broadening government revenues and improving the efficiency and quality of public spending.

On monetary policy, the organization stated that Banxico should maintain a restrictive policy stance until inflation converges toward its 3% target, projecting headline inflation to moderate to 3.2% by 2027.