Mexico holds growth forecast despite recent slowdown, lifts inflation view

Mexico's Finance Ministry on Thursday maintained its?economic growth?forecast for 2026, despite preliminary data showing that the economy shrank slightly in?the?first quarter.

The ministry's first-quarter report on public finance held its?annual GDP forecast at 1.8%-2.8%, even though earlier figures showed that the economy shrank by 0.8% during the quarter. This was a larger drop than anticipated.

The ministry raised its inflation forecast for the year to 3,7%, up from the original estimate of 3.0% in the budget for 2026. This indicates that the price pressures will likely remain higher than the official 3% target set by the central bank.

Mexico's annual rate of inflation dipped in the first half of April but remained at 4.53%.

Edgar Amador, the Finance Minister, said that inflation expectations in Mexico remained contained.

Mexico is facing a slowing of domestic momentum, as well as an uncertain external environment.

Amador stated that changes in global trade policies had affected manufacturing industries the most, as they were exposed to disruptions along supply chain. This also affected consumer and business sentiment.

He said that "these changes have created a greater level of uncertainty which has affected consumption decisions and investment decisions."

The Finance Ministry forecast that the average price for Mexico's crude export basket would be $77.3 per barrel. This was a price higher than the $54.9 price assumed by the budget. It?projected that budget revenues would be 59 billions pesos below expectations this year, due largely to lower oil income.

Amador stated that oil revenues fell in the first quarter due to the appreciation of the peso and lower production, but some of this weakness could be offset by higher export crude prices in the upcoming months.

The ministry said that despite the soft start to the year, it maintained its fiscal target of 4.1% of GDP. It also stated that public debt was 50.4% GDP in the first three months. (Reporting from Kylie Madry and Ana Isabel Martinez).

(source: Reuters)