World Bank Lowers Mexico's 2026 Growth Forecast to 1.3% Amid USMCA Review Concerns

World Bank Adjusts Mexico's Economic Outlook

The World Bank has lowered its economic growth forecast for Mexico in 2026 to 1.3%, according to its latest semi-annual Global Economic Prospects report released on Tuesday. This revised figure represents a decrease from previous estimates, including a 1.4% forecast in October and a more substantial reduction from the 1.6% projected in January 2025. In its June 2024 Latin America and Caribbean economic outlook, the institution had previously estimated Mexico's 2026 GDP growth at 2.1%.

The international financial institution cited the upcoming review of the United States-Mexico-Canada Agreement (USMCA) free-trade agreement as a significant factor contributing to the downgraded outlook. Beyond the trade agreement, persistent structural challenges, such as weak investment levels, low productivity growth, and limited fiscal space, were also highlighted as constraints on Mexico's long-term economic potential. Uncertainty in trade relations with the United States and domestic political risks further contribute to this subdued outlook.

Implications of the USMCA Review

The USMCA review, scheduled for 2026, marks a critical juncture for North American economic integration. This review, occurring six years after the agreement's implementation, will assess its performance and determine its future. While the USMCA has been credited with fostering increased trade and investment flows for Mexico, potential adjustments to origin requirements within the agreement could impact investment flows and operational strategies.

For Mexico, a key objective during this review is to ensure the agreement's continuity and strengthen conditions that support investment, operations, and growth for businesses within the region. The automotive industry, which accounts for approximately 22% of total trade under the USMCA, is particularly sensitive to these discussions. The World Bank also noted that 'tariff disputes and the upcoming USMCA review may curb investment and trade given US export dependence.'

Mexico's Position in the Regional and Global Economy

The updated forecast places Mexico's projected growth for 2026 among the lower end for the Latin American region. One report indicates that Mexico is projected to be the second-slowest growing economy in Latin America by that year, only ahead of Haiti. However, another perspective suggests that Mexico's economy is expected to rise to 1.8% in 2027, influenced by its trade relationship with the United States.

Globally, the World Bank's report indicates that overall output growth is expected to slow slightly to 2.6% in 2026. The institution warned that if current trends persist, the 2020s are on track to be the weakest decade for global growth since the 1960s, potentially leading to stagnation and joblessness in emerging markets and developing countries.