According to a draft budget released by Mexico’s finance ministry on Tuesday, the government now projects that the country’s economy will grow between 1.5% and 2.3% this year, down from an earlier forecast of 2.0% to 3.0%.
The growth outlook, which the finance ministry referred to as cautious, comes amid worries that Mexico is about to enter a recession and is more optimistic than those made by the private sector and the country’s central bank.
For 2026, the finance ministry projects 1.5% to 2.5% economic growth. The second-largest economy in Latin America fell in the fourth quarter and again in January after being rattled in recent months by waning investor confidence, concerns of U.S. tariffs, and an extended drought. Mexico would enter a technical recession in the event of a first-quarter contraction.
Mexico’s finance ministry said in a statement that supply shocks that have continued since late last year and poorer residential investment were the reasons for the downward revision of the 2025 growth prediction.
“Additionally, business caution driven by uncertainty over U.S. trade policy is also a contributing factor,” the statement added.
The autonomous Bank of Mexico in February forecast the economy in 2025 could shrink by as much as 0.2% or expand by as much as 1.4%. Earlier on Tuesday, private sector analysts polled by Mexico’s central bank lowered their average growth forecast for the year to just 0.5%.
The finance ministry said it sees domestic consumption, job creation, and investments in strategic sectors as sustaining growth this year. Mexico’s economy has been a challenge for President Claudia Sheinbaum, who inherited the country’s highest budget deficit since the 1980s when she took office in October, but has resisted calls for deep fiscal reform.
Mexico’s budget deficit is projected to range from 3.9% to 4.0% this year before dropping to between 3.2% and 3.5% in 2026, according to Tuesday’s budget blueprint, which lawmakers use to plan future expenditure.
The draft predicts that annual inflation would end the year at 3.5%, which is within the central bank’s target range of 3%, plus or minus one percentage point, and marginally lower than the 3.77% annual rate that was recorded in February.
For 2026, the draft budget predicts that inflation will further ease to 3.0%.
The finance ministry sees Mexico’s peso trading at 20.0 pesos per dollar at the end of this year, and slightly strengthening to 19.7 next year.
Average crude oil production this year is estimated at 1.762 million barrels per day (bpd), rising to 1.775 million bpd in 2026.
