Mexico's economy is set for a modest recovery in 2026, but its path remains tied to trade negotiations with its North American partners. Bank of America projects growth will accelerate to 1.2% next year, a welcome bounce from the projected 0.4% expansion in 2025. This improvement is fueled by fading domestic uncertainty following 2024 constitutional changes, allowing for a less restrictive monetary policy from Banxico, which is expected to cut its benchmark rate to around 6%.

Fiscal policy is also shifting from a drag to neutral. However, the outlook is clouded by the mid-2026 review of the U.S.-Mexico-Canada Agreement (USMCA). While analysts expect the core trade pact to remain intact, the review process introduces significant volatility.

The United States is likely to use the agreement as leverage on non-trade issues like migration and Chinese investment, creating a headwind for exporters and investors. Consequently, the peso is expected to weaken, with the USD/MXN pair forecast near 19 by year-end as carry trade appeal diminishes.