Mexico in Focus: Mexico – A soft start to the year

Research evidence excerpt

Mexico in Focus: Mexico – A soft start to the year

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Mexico in Focus

Mexico – A soft start to the year

Key takeaways 19 May 2026

GEM Fixed Income Strategy &• Growth started 2026 on weak footing, with soft activity, weakening demand and a

Economics

sluggish labor market. LatAm | Mexico

• External uncertainty remains high, weighing on investment, net exports and FX

volatility. Carlos Capistran LatAm and Canada Economist

BofAS• S&P changed Mexico's outlook to negative. We think the fiscal deficit will remain high, +1 646 743 2921

around 5% of GDP. carlos.capistran@bofa.com

Christian Gonzalez Rojas

LatAm Local Markets Strategist

BofASUncertainty remains high = low growth = fiscal concerns christian.gonzalezrojas@bofa.com

Mexico continues to face uncertainty as the Iran conflict persists and the USMCA review

approaches. Although Mexico is broadly neutral to oil price shocks, higher oil prices and

elevated global uncertainty tilt risks toward weaker growth and higher inflation, while

the USMCA review—likely to result in a trilateral extension with targeted changes,

though with a risk that the “sunset clause” is activated—means trade uncertainty is

unlikely to fade, in our view. Irrespective of the outcome, we expect this to continue

weighing on net exports, restraining investment, and driving FX volatility. Domestic

uncertainty also remains high. Meanwhile, 2026 started on a soft footing, with GDP

contracting in 1Q as both consumption and investment weakened and all sectors

declined. The labor market reinforces this view, pointing to an economy that remains

more in a drift than a dip. As a result, we have lowered our growth forecasts, although

some support could come from looser fiscal policy, the infrastructure plan, and the FIFA