By Anthony Harrup


MEXICO CITY--The Bank of Mexico lowered its economic growth forecast for this year following an unexpectedly weak first quarter, with the review of the U.S.-Mexico-Canada Agreement and the conflict in the Middle East adding uncertainty to the outlook.

In its quarterly report, the central bank said Wednesday that it expects gross domestic product to expand 1.1% this year, down from its previous forecast of 1.6%. For 2027, the bank nudged its GDP forecast up to 2.1% from 2% previously.

The main reason for the downgrade was a "considerably weaker than expected performance" in the first quarter, partially offset by higher forecasts for the second and third quarters, the bank said. It noted solid export demand at the end of the first quarter and start of the second quarter, and predicted a pickup in household consumption after a sluggish start to the year.

In the first quarter, Mexico's gross domestic product contracted 0.6% from the previous quarter in seasonally adjusted terms, and was up 0.2% unadjusted from the year-earlier period. GDP expanded 0.5% in all of 2025.

Investment is expected to remain weak at least until the second half of 2026 amid uncertainty around the review of the USMCA, the Bank of Mexico said, while the conflict in the Middle East introduced an additional layer of uncertainty.

"Although a direct impact on the Mexican economy isn't expected, risks for the world economy and the price of fuels and other raw materials contribute to keeping the balance of risks for domestic growth biased to the downside," the bank said.

The Bank of Mexico cut its benchmark interest rate by a quarter of a percentage point to 6.5% on May 7 and said that it marked the end of the monetary easing cycle. Minutes of the meeting last week confirmed that a majority of board members expect to keep the rate at its current level for the foreseeable future.


Write to Anthony Harrup at anthony.harrup@wsj.com


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05-27-26 1524ET