Banxico Lifts Mexico Growth Forecast, Says Investment Grade Holds

Mexico · MONETARY POLICY

The central bank answers the rating anxiety that followed May’s downgrade, and nudges its growth call higher.

Banco de México raised its 2026 growth forecast to 1.5% in a quarterly report published on 26 August 2026. The same report says the Mexico investment grade standing holds at the main rating agencies.

What Banxico published on 26 August

Banco de México, the central bank known as Banxico, published its quarterly report for April to June on 26 August 2026. It raised the 2026 forecast for gross domestic product, or GDP, to 1.5% from 1.1%.

The forecast range widened upward to between 1.0% and 2.0%, from 0.5% to 1.7% in the previous report. The 2027 point forecast slipped to 2.0% from 2.1%.

Banxico said the revision follows second-quarter activity that beat its own expectations. Output grew 1.42% from the first quarter, in seasonally adjusted terms.

That rebound followed a contraction of 0.34% in the first quarter of 2026. The bank still expects only a moderate and gradual acceleration from here.

The Mexico investment grade question

Investment grade is the top band of credit ratings, the band that marks a borrower as safe enough for conservative funds. Falling below it forces some pension funds and index trackers to sell.

The report addresses the Mexico investment grade question directly, in its section on financial markets. It notes that one agency cut the outlook to negative in May and another cut the rating a notch.

Even after those moves, Banxico writes, the sovereign rating keeps its investment grade at the main agencies. Credit risk indicators have behaved in an orderly way, the bank adds.

That is a statement about where the ratings stand, not a promise about where they go. Banxico does not set ratings, and the agencies review Mexico on their own calendars.

What the three agencies did this year

Fitch Ratings affirmed Mexico at BBB- with a stable outlook on 10 April 2026. That is the lowest investment grade step on its scale.

S&P Global Ratings kept the foreign currency rating at BBB on 12 May 2026 but moved the outlook to negative. It cited slow fiscal consolidation, weak growth and support for state companies.

Moody’s Ratings cut Mexico to Baa3 from Baa2 on 20 May 2026 and set a stable outlook. Baa3 is the last investment grade rung on the Moody’s scale.

So the Mexico investment grade position now rests on the bottom step at two of the three agencies. One of the three, S&P Global Ratings, carries a negative outlook.

Why Pemex keeps appearing in the argument

Petróleos Mexicanos, or Pemex, is the state oil company, and the government has repeatedly covered its debts. Rating agencies therefore treat the company’s finances as part of the sovereign’s own balance.

Pemex reported financial debt of US$77.5 billion at the end of June 2026. That was 9.1% below the level at the close of 2025.

The company posted a second-quarter net profit of 18,024 million pesos (US$1.06 billion). The conversion uses Banxico’s FIX reference rate of 16.9660 pesos per dollar for 26 August 2026.

Moody’s counted roughly US$35 billion of government support for Pemex in 2025, near 1.9% of GDP. It put a further US$14 billion in the 2026 budget, about 0.7% of GDP.

Fiscal discipline is the stated condition

Banxico closes the report with a list of what keeps the economy resilient to outside shocks. Fiscal discipline heads that list, alongside a sound banking system and sustainable external accounts.

The bank also names a flexible exchange rate and a monetary policy committed to price stability. It frames these as the base for stronger and more durable growth.

Rating agencies use similar language when they explain the Mexico investment grade decision. S&P Global Ratings pointed to slow fiscal consolidation as the main risk to the current rating.

Public debt has been the pressure point, and Moody’s put it near 49.3% of GDP in 2025. S&P Global Ratings sees it approaching 54% of GDP by 2029.

Reserves, the peso and the exchange rate

International reserves stood at US$255.1 billion at the end of June 2026, Banxico reported. That was above the US$254.6 billion recorded three months earlier.

Mexico also holds a Flexible Credit Line, or FCL, with the International Monetary Fund. The IMF renewed it in November 2025 for two years at US$24 billion.

Those buffers are the usual answer to worries about capital leaving the country. They do not remove rating risk, but they widen the room to absorb a shock.

The FIX rate is the reference exchange rate that Banxico determines each business day. It stood at 16.9660 pesos per dollar for 26 August 2026, the latest reading available.

Inflation, rates and the risks ahead

Banxico kept its benchmark interbank rate at 6.50% in June and again in August 2026. It has said that holding at that level looks appropriate for now.

The report keeps the inflation forecasts published on 6 August 2026 and sees inflation reaching the 3% target in 2027. The path down is expected to be more gradual than previously thought.

The balance of risks to growth still tilts downward, Banxico says. It points to the annual review process for the United States-Mexico-Canada Agreement, or USMCA.

That uncertainty is holding back investment, according to the report. Exports should expand only moderately, tracking industrial production north of the border.

What it means for investors holding pesos

Foreign holders of Mexican government bonds watch the rating because it decides who is allowed to buy. A cut below the top band would shrink that buyer pool sharply.

For now the label survives, and Banxico says credit risk indicators have stayed orderly. Measures of sovereign credit risk sat below their late-March levels during the second quarter.

Expats and remote workers paid in dollars follow the same story through the exchange rate. A downgrade usually weakens a currency, which lifts local purchasing power for dollar earners.

The report gives no forecast for the peso, and Banxico does not target a level. It relies instead on the floating rate to absorb shocks as they arrive.

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Frequently Asked Questions

Sources

• www.banxico.org.mx
• www.bloomberglinea.com
• www.elfinanciero.com.mx
• lasillarota.com
• www.eluniversal.com.mx
• riodoce.mx
• www.imf.org

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