Mexico's finance executives association IMEF slightly raised its 2026 GDP growth forecast in its March survey, but warned the conflict in Iran has added uncertainty to US-Mexico-Canada (USMCA) free trade agreement negotiations, further clouding the outlook.
IMEF increased its 2026 growth forecast to 1.4pc from 1.3pc in its previous survey, citing upward revisions to fourth-quarter 2025 GDP and similar adjustments by the central bank and other private sector surveys.
"But this is just one tenth of one percent, which, in addition, does not fully incorporate the events that have taken place since 28 February," said Herrera, given many of the executives filed responses before the start of the US-Iran war.
Herrera added that higher energy prices are unlikely to hit first-quarter GDP, given advanced gasoline purchases, with prices set before the war erupted.
"But a risky situation is starting to take shape for Mexico, the effects of which we will mainly see in the second quarter," Herrera said, as uncertainty builds ahead of the 1 July USMCA review deadline.
"We think investment will remain suppressed until we have good news on that front," he added, amid concerns the US could extend the process through its November midterm elections.
The Middle East conflict could also pressure Mexico's fiscal deficit, IMEF said.
"Finding a solution to this confrontation is proving slower than originally anticipated, and it is highly likely that our country will suffer the effects of increased gasoline and food prices," the association said.
Mexico's government has already indicated it would subsidize fuel excise taxes to cushion rising prices, but this could push the projected 4.5pc fiscal deficit closer to the 5pc level seen in 2025, IMEF said.
As a result, IMEF warned that public-sector debt could reach 60pc of GDP, potentially triggering a credit rating action and pushing sovereign and state-owned Pemex debt closer to non-investment grade.
The group also flagged increased volatility in the peso-dollar exchange rate, noting this could begin generating pass-through effects to inflation if the conflict persists for several months.
For now, IMEF continues to see the central bank issuing two quarter-point rate cuts to the target interest rate, to 6.5pc from the current 7pc, by the end of 2026, and held its end-2026 inflation estimate at 4pc.
IMEF slightly strengthened its peso outlook, forecasting Ps18.35/$1 by end-2026, compared with Ps18.4/$1 in the previous survey.
