Executive Introduction: Growth Is Positive, but Structurally Limited

Mexico is expected to avoid recession, but not stagnation. According to Bank of America (BofA), Mexico’s economy is projected to grow 0.6% in 2025 and around 1.0% in 2026, with upside potential only if the USMCA framework remains intact. These forecasts sit below historical averages and slightly outside market consensus.

The key takeaway is not the exact decimal point of growth, but what it represents: Mexico’s economic expansion remains constrained by structural and cyclical factors, with nearshoring acting more as a stabilizer than a growth engine—at least for now.

Diverging Forecasts: Bank of America vs. Market Consensus

According to Carlos Capistrán, Chief Economist for Mexico, Canada, and Latin America at Bank of America, Mexico’s growth trajectory remains subdued even under favorable trade assumptions.

BofA forecast (base case)

• 2025 GDP growth: 0.6%
• 2026 GDP growth: ~1.0%

Market consensus (Citi survey)

• 2025: 0.5%
• 2026: up to 1.4%

Capistrán notes that if the USMCA remains in place without major disruption, growth could reach 1.4% to 1.6% in 2026, but he stresses that even this outcome would still reflect low-growth equilibrium rather than economic acceleration.

“The message behind these numbers—0.6%, 1%, or even 1.6%—is that Mexico’s growth is very low. There is nothing internally that would allow the economy to grow much faster,” Capistrán said.

A Structural Shift Since 2019

Mexico’s current growth profile contrasts sharply with its pre-2019 trajectory. Before that period, the country typically expanded at 2.2% to 2.5% annually.

Capistrán argues that the growth slope shifted downward after 2019, citing a sequence of events that compounded uncertainty:

• Cancellation of major infrastructure projects
• Pandemic-related disruptions
• Persistent policy and regulatory uncertainty

“Since the airport cancellation, Mexico’s growth trend has clearly stayed below 1%,” he emphasized.

This long-term deceleration frames the current debate: nearshoring has helped prevent recession, but it has not yet been powerful enough to restore trend growth.

Nearshoring as a Stabilizer, Not a Catalyst

In 2025, nearshoring played a defensive role in Mexico’s economy. According to Capistrán, without nearshoring-related activity, Mexico would likely be in recession today.

The main support came from non-automotive manufacturing exports, particularly:

• Computer equipment
• Machinery and specialized manufacturing

“Since nearshoring emerged as an opportunity, Mexico has expanded its production capacity beyond automotive manufacturing, especially into machinery and computing equipment, which is growing strongly this year,” Capistrán noted.

This aligns with recent trade data showing stronger performance in technology-related exports, even as domestic demand remains constrained.

Why Growth Remains Capped

Despite export resilience, several forces continue to limit expansion:

1. Persistent Uncertainty

Mexico faces dual uncertainty:

• External: USMCA review, trade policy signals, geopolitical tensions
• Internal: constitutional reforms, regulatory implementation, institutional credibility

2. Tight Fiscal Policy

The government is undergoing a fiscal consolidation phase, reducing its ability to stimulate growth through public spending.

3. Restrictive Monetary Conditions

Although interest rates are gradually easing, financial conditions have remained restrictive, limiting investment appetite.

“It is very difficult to generate growth with external uncertainty, domestic uncertainty, tight fiscal policy, and non-accommodative monetary policy,” Capistrán explained.

Infrastructure and Energy: The Binding Constraints

Beyond macro policy, physical bottlenecks remain a critical limiter of nearshoring’s impact.

Capistrán highlighted:

• Insufficient electricity generation and transmission
• Transport infrastructure gaps
• Logistics inefficiencies

These constraints are particularly relevant for energy-intensive sectors and advanced manufacturing, where Mexico’s comparative advantage could otherwise be stronger.

“We know there are sectors that need large amounts of energy, and that limits how much of the nearshoring opportunity Mexico can actually capture,” he said.

Exports Carrying the Economy—for Now

One reason GDP forecasts were revised slightly upward is the unexpected strength of exports, particularly in the first half of the year. Companies front-loaded inventories in anticipation of potential trade disruptions, temporarily boosting manufacturing output.

However, this dynamic is not structurally sustainable. Export strength has helped stabilize growth, but without renewed investment, its impact will fade.

USMCA: The Central Variable for 2026

BofA’s base scenario assumes that the USMCA will survive its scheduled review, albeit with modifications. Capistrán expects:

• Resolution in the second half of 2026
• Stricter rules of origin
• Continued trilateral structure with Canada

“We believe the agreement will remain largely intact, but uncertainty will persist until the review is concluded,” he said.

Until then, Mexico is likely to face headline-driven volatility, delaying long-term investment decisions.

What This Means for Investment and Location Decisions

For companies evaluating Mexico as an expansion or relocation destination, the message is nuanced:

• Macroeconomic growth will remain modest
• Export-oriented operations retain advantages
• Nearshoring works best where infrastructure already exists
• Timing and location selection matter more than ever

This reinforces the importance of:

• Established industrial regions
• Access to power and logistics
• Regulatory predictability at the local level

Outlook: Stability Over Acceleration

Mexico is not entering a growth boom, but neither is it losing relevance. Nearshoring continues to act as an economic shock absorber, while USMCA remains the anchor of predictability.

The challenge for Mexico is not attracting interest, but converting interest into sustained investment under constrained macro conditions.

FAQ – Common Search Questions

What is Mexico’s GDP growth forecast for 2026?Bank of America projects around 1.0%, with upside to 1.4–1.6% if USMCA remains stable.

Why is Mexico’s growth lower than before 2019?Due to long-term uncertainty, infrastructure gaps, fiscal consolidation, and restrictive financial conditions.

Is nearshoring still supporting the economy?Yes, particularly through non-automotive manufacturing exports, but its impact is currently stabilizing rather than accelerating growth.

How important is USMCA for Mexico’s outlook?Critical. Most medium-term forecasts assume the agreement remains in place after the 2026 review.

What limits Mexico’s ability to grow faster?Energy constraints, infrastructure bottlenecks, policy uncertainty, and limited domestic demand.