Economist Gabriel Casillas forecasts a 2026 for Mexico with improved growth prospects, driven by the US economy and a light political agenda. He anticipates gradual fiscal consolidation and early inflationary challenges impacting interest rates. He also highlights the T-MEC review and minor local elections.
In his column published in El Financiero, Gabriel Casillas, chief economist for Latin America at Barclays, outlines five key aspects for Mexico in 2026. First, the T-MEC review will be central, though covered in a previous installment. On growth, analyst consensus projects GDP at 1.2% for 2026, more than double the 0.4% estimated for this year. This boost will come from US economic expansion, fueled by the 'One Big Beautiful Bill,' deregulation, and AI investments, plus avoiding first-year government slowdowns.
Regarding fiscal consolidation, President Claudia Sheinbaum's administration will cut the deficit from 5.7% of GDP in 2024 to 4.2% by end-2026, accounting for public sector financial requirements including Pemex and CFE. Support for Pemex is estimated at nearly 50 billion dollars in 2026, following INEGI's nominal GDP revisions that adjusted calculations by about 500 billion pesos.
Casillas expects an inflationary 'hump' in the first quarter from IEPS hikes on sodas, tariffs on Chinese imports, and a 13% minimum wage increase. This will complicate Banco de México's rate-cutting cycle, though reaching 6.50% by year-end is feasible. 2026 will be Jonathan Heath's last year on Banxico's Governing Board, necessitating a new appointment by Sheinbaum.
The political agenda will be light, featuring only the Coahuila gubernatorial election on June 7, a state governed by the PRI since 1929. A potential electoral reform could cut costs by eliminating local bodies and federal legislators but raises concerns about opposition competitiveness.
