Mexico Projects Lower Deficit in 2026 as Economy Strengthens

Mexico’s Finance Ministry announced in its 2026 budget proposal that the country’s fiscal deficit is expected to narrow slightly to 4.10% of GDP, down from the projected 4.32% in 2025. The adjustment comes as Latin America’s second-largest economy is forecast to expand between 1.8% and 2.8%, marking an increase of 1.3 percentage points from previous estimates.

The government’s growth outlook is notably more optimistic than international forecasts. The International Monetary Fund (IMF) projects Mexico’s economy to expand by just 1.4% in 2026, while the Bank of Mexico anticipates growth at 1.1%. Inflation, however, is expected to align with central bank targets, with consumer prices forecast to close 2026 at 3.0%.

A significant focus of the budget is on state-owned oil giant Pemex, which continues to struggle under heavy debt. The government plans to allocate 263.5 billion pesos (about $14.14 billion) to help Pemex meet its debt and loan obligations. The move underscores ongoing pressure to stabilize the company’s finances while balancing public spending priorities.

President Claudia Sheinbaum’s administration is also considering trade measures. Following her remarks on possible tariffs against countries without trade agreements, including China, the proposal highlights a review of the “General Import Tax” to foster domestic development, though details remain limited.

In addition, the budget introduces new “healthy taxes” aimed at discouraging the consumption of certain products. These include higher levies on soft drinks, nicotine pouches, and even video games, reflecting a strategy to both raise revenue and promote public health.

The draft budget will now be debated in Congress, where Sheinbaum’s party and its allies hold majorities in both chambers, giving the plan a strong chance of approval.