Citi Raises Mexico's 2026 Growth Forecast to 1.3% but Warns of Weakness

Citi has revised its economic growth forecast for Mexico in 2026, increasing it to 1.3% from a previous estimate of 1.1%. The upward adjustment comes after observing a stronger-than-expected performance in the second quarter, which saw annual growth near 2.2%. This growth was primarily driven by a significant rebound in construction activity in April, partly linked to infrastructure projects for the World Cup.

Despite this positive revision, Citi economists caution that the momentum may not be sustained throughout the latter half of 2026. They point to several factors that could limit expansion, including persistent weakness in investment, ongoing uncertainty surrounding the future of the United States-Mexico-Canada Agreement (USMCA), and a slowdown in formal employment growth. These elements contribute to a cautious outlook for the remainder of the year.

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the expansion will continue to be limited during the second half of the year due to weakness in investment, uncertainty about the Mexico, United States and Canada Agreement (USMCA) and lower dynamism of formal employment.

Looking ahead to 2027, Citi projects Mexico's economy to grow by approximately 2%. This forecast, however, is conditional on several key developments. Greater clarity regarding the USMCA trade deal is considered crucial, as is a more visible and effective execution of the government's infrastructure initiatives, known as Plan México. Citi views the likelihood of a definitive resolution on the USMCA in 2026 as low, suggesting 2027 is a more probable timeframe for such a decision.

Interestingly, Mexico continues to gain market share in U.S. imports despite trade tariffs and general uncertainty, outperforming both China and Canada in certain sectors. A notable driver of this trend is the surge in data processing machine exports, which have nearly doubled recently due to the boom in artificial intelligence in the United States. However, Citi points out that Mexico still relies heavily on imported inputs, including microchips from Taiwan, which limits the value added that remains within the country. Conversely, exports of vehicles and auto parts have declined, and overall manufacturing production remains subdued, making the automotive sector a significant drag on economic performance.

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the probability that the definition of the trade agreement with the United States and Canada will arrive in 2026 is low and it is more feasible that it will happen in 2027.