OECD Economic Surveys Mexico 2026 Executive summary
February 2026
• The economy remains stable, yet revitalizing growth is a priority
• Growth is set to remain modest amid elevated risks
• Higher revenues are needed to safeguard fiscal sustainability and boost productivity-enhancing spending
• Building up skills and facilitating women employment would reduce informality
• Mexico is raising its climate ambition
• Boosting digitalization would boost productivity
2 . OECD ECONOMIC SURVEY OF SPAIN 2023 – EXECUTIVE SUMMARY
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The full book is accessible at OECD ECONOMIC SURVEYS: MEXICO 2026
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THE ECONOMY REMAINS STABLE, YET REVITALIZING GROWTH IS A PRIORITY
Mexico’s economy has demonstrated resilience despite elevated uncertainty and trade barriers. Fiscal consolidation is advancing after the sharp rise in the deficit in 2024, an electoral year. Inflation has eased but remains above the 3% target. After two decades of modest growth, structural reforms are needed to boost productivity and unlock stronger economic growth
The Mexican economy has been significantly affected by heightened global uncertainty. Private consumption and non-automotive exports have supported activity Sound public debt management, a well-capitalised and liquid financial system, and low private sector indebtedness continue to underpin economic stability.
Mexico is particularly exposed to trade restrictions Over 80% of its exports go to the United States and supply chain integration is deep. The increase in the tariff rate on exports to the United States has started to impact exports, particularly in the automotive sector, though the full impact is expected to unfold only over the medium-term. Preferential treatment for exports compliant with the United States–Mexico–Canada Agreement (USMCA) framework has helped sustain Mexico’s trade competitiveness. Expanding compliance with rules of origin, for example through e-certification tools, would further ease the adjustment to higher tariffs.
Revitalizing growth remains a key priority. Multidimensional poverty has fallen, with the share of people living in poverty declining from 36% in 2022 to 30% in 2024. Following two decades of relatively weak
performance and stagnant productivity, boosting growth is an urgent challenge (Figure 1) To this end, the government has launched Plan México to revitalise investment by streamlining regulations, closing infrastructure gaps, and promoting local supply chains Mexico needs also to increase public spending in growth enhancing areas, strengthen skills development, accelerate digitalization, strengthen governance, and expand women’s labour force participation to boost potential growth. Unlocking the country’s considerable renewable energy potential could further attract investment while supporting climate change mitigation.
Improving governance is essential to boost growth and productivity. Strengthening the rule of law, the de facto independence of institutions and judicial effectiveness would enhance contract enforcement and investor confidence. Preserving a stable and predictable regulatory framework is equally important to provide clarity for long-term investment decisions. Further reducing crime would also boost investment and improve citizens’ well-being
Figure 1. GDP per capita growth has remained subdued over the past two decades
Index of real PPP-adjusted GDP per capita, 2000 = 100
Source: World Bank World Development Indicators (WDI) (database).
GROWTH IS SET TO REMAIN MODEST AMID ELEVATED RISKS
GDP growth is projected at 1.4% in 2026 and 1.7% in 2027, supported by private consumption and external demand from the United States. Inflation is expected to gradually ease. Trade tensions and heightened global policy uncertainty remain significant risks to the outlook.
Private consumption will support growth. This will be aided by low unemployment and easing inflation. Private investment will gradually benefit from lower interest rates, though it will remain constrained by high domestic and global uncertainty. Public investment is set to stay subdued amid efforts to reduce the fiscal deficit. Export growth will be dampened by higher trade tariffs and high global uncertainty
Inflation is expected to fall gradually (Table 1). After increasing in the first half of 2025, mainly driven by food prices, both headline and core inflation are projected to ease, as growth remains moderate However, risks remain, particularly from food and services prices, which could slow the disinflation process Further reductions in the policy rate should remain data dependant and take place once there is clear evidence that inflation is on a path back to the 3% target.
The financial sector has ample buffers. It has reacted in an orderly manner to the high uncertainty. It maintains capitalisation, profitability and liquidity levels
above most OECD countries. Private sector indebtedness remains contained. Safeguarding the financial system from criminal networks remains an ongoing priority. Mexico’s financial authorities have established frameworks and procedures to address potential risks, and maintaining close coordination among financial regulators, the tax authority, law enforcement agencies, as well as with international partners, will help sustain these efforts.
Risks remain substantial. A sharper slowdown in the United States, Mexico’s main trading partner, may weigh further on external demand and exports Increased global risk aversion and exchange rate volatility could raise sovereign borrowing costs and trigger capital outflows. However, Mexico’s strong external position, underpinned by moderate external debt, ample foreign exchange reserves and a sustainable current account balance, provides buffers to absorb shocks
Source: OECD Economic Outlook (database).
HIGHER REVENUES ARE NEEDED TO SAFEGUARD FISCAL SUSTAINABILITY AND BOOST PRODUCTIVITY-ENHANCING SPENDING
The fiscal deficit rose in 2024 to its highest level in 35 years. Fiscal consolidation is now underway and should advance, guided by a well-defined set of measures on both the spending and revenue sides. Rising expenditures on interest payments, non-contributory pensions and support for PEMEX have constrained fiscal space, limiting resources for key areas such as education, the digital and green transitions, and the fight against crime. Mobilizing additional revenues would help address priority spending needs and safeguard fiscal sustainability.
Fiscal consolidation is underway and should be maintained overtime. In 2024 the public sector deficit rose sharply (Figure 2), reaching its highest level in 35 years, driven by spending on flagship infrastructure projects, universal non-contributory pensions and additional support to PEMEX, the state-owned oil company. In 2025, the authorities initiated a consolidation process aimed at reducing the deficit to 3% of GDP by 2027. Consolidation efforts in 2025 relied mainly on expenditure restraint, while tax revenues increased only marginally.
Raising revenues and improving the quality of public spending are essential to safeguard fiscal sustainability and create space for productivityenhancing investments. Public spending remains relatively low and key areas such as education and health already receive less funding than in OECD and regional peers. Expanding revenues and allocating that fiscal space to areas with limited economic returns, such as infrastructure projects with questionable costbenefit profiles or PEMEX, would also be counterproductive. Establishing a medium-term fiscal framework can improve strategic planning and help reconciling spending needs with fiscal prudence
A more strategic approach to expenditure planning and prioritisation would boost growth while supporting fiscal consolidation. Basing infrastructure
projects on rigorous technical evaluation, clear prioritisation, and strong accountability mechanisms would allow resources to be allocated more efficiently while reducing the risk of cost overruns. Stronger project appraisal systems and greater transparency across the investment cycle are essential to raise the quality of public investment, build public trust, and ensure spending supports medium-term growth. Moving toward targeted non-contributory pensions would ensure that support reaches those most in need, while preserving public resources for future generations and other pressing priorities.
There is room to increase tax revenues. Mexico has the lowest tax-to-GDP ratio in the OECD. More effective use of existing taxes could help raise additional revenues without undermining growth. For instance, authorities are working to strengthen customs duties by addressing under-invoicing through robust enforcement and digital tracking systems. Modernizing the cadastral system would support higher collections from property taxes. Further gains could come from reducing tax expenditures, particularly in VAT, from broadening the carbon tax base, and from enhancing incentives for states to collect the vehicle ownership tax.
Upgrading Mexico’s fiscal framework can help smooth economic fluctuations and provide countercyclical support during downturns. The Fiscal Responsibility
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Law, enacted in 2006, institutionalised the country’s commitment to fiscal discipline and has been central to maintaining prudence. However, its current design favours short-term discretionary cuts to meet annual targets, making fiscal policy highly procyclical. Upgrading Mexico’s fiscal framework is urgent to strengthen credibility and create space for priority
spending. A genuine medium-term framework would reduce procyclicality and facilitate that new revenues are channelled into areas with highest economic and social returns. Introducing a debt anchor and a betterdesigned expenditure rule would safeguard sustainability
Figure 2. The public sector deficit increased sharply in 2024
B. Revenue and expenditure % of GDP
Revenue Expenditure
Source: OECD Economic Outlook (database).
BUILDING UP SKILLS AND FACILITATING WOMEN EMPLOYMENT WOULD REDUCE INFORMALITY
Labour informality has no single cause. Therefore, tackling it requires a comprehensive policy strategy. As informality is strongly linked to low levels of education, enhancing skills should be a key element of that strategy. Ensuring that more students complete at least secondary education, improving the quality of education and aligning tertiary and vocational programs with labour market needs are essential. Expanding childcare and eldercare provision would also reduce barriers that push many women into informal jobs or out of the labour force.
Informality is closely linked to low educational attainment (Figure 3). Many young people leave school before finishing secondary education and end in informal jobs with limited training opportunities. PISA results show that many students leave secondary school without mastering basic competencies, also limiting their ability to transition into formal jobs. This creates a vicious cycle in which low skills lead to low productivity and low-paid informal work, with little chance to upgrade skills and transition to better jobs
Ensuring than more students complete secondary education is a critical priority This requires better data to identify students at risk of dropping out. Annual
national diagnostic tests would help track learning outcomes, detect early signs of academic lag and guide tutoring support to students most in need. They would also help identify subject areas where teacher training should be prioritised. Strengthening professional orientation across all education levels would improve students’ education choices and outcomes.
Better aligning educational programmes with labour market demand is another crucial priority. Nearly 30% of university graduates are employed informally, while businesses face significant talent shortages. Strengthening the link between education and labour market needs would ease skills gaps and expand access
to higher-productivity, formal employment Dual vocational education, though still limited, has delivered positive outcomes and should be scaled up
Efforts to increase access to affordable childcare are underway and should be given greater priority Care responsibilities fall disproportionally on women, often preventing them from taking up jobs or pursue education The childcare network should prioritise lowincome families and cover both formal and informal workers. Robust quality standards will be key to ensure positive outcomes for both child development and women’s access to formal work Strengthening
Informality rate by education level, % of workers, 2025-Q3
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eldercare would also support female formal employment.
The structure of the school day creates an additional barrier to formal employment for mothers. Public primary schools often operate in shifts, providing only four to five hours of instruction. In the absence of afterschool provision, many mothers are unable to take up or remain in full-time formal jobs or must rely on extended family for childcare. Scaling up full-time schedule programmes would advance both women's access to formal employment and education outcomes.
Source: OECD calculations based on INEGI.
MEXICO IS RAISING ITS CLIMATE AMBITION
Mexico is taking decisive steps to reinvigorate its climate ambition and reengage with global efforts to reduce greenhouse gas emissions. Meeting climate targets will require unlocking its considerable renewable energy potential. Given Mexico’s high vulnerability to climate change, stronger adaptation measures are also needed. More accurate, consistent, and timely information on water availability and usage would help to improve water management and ensure reliable access for households and firms.
Mexico has recently pledged to achieve net-zero greenhouse gas emissions by 2050. These renewed commitments are a significant policy shift from the previous administration and provide a clearer roadmap for government agencies and the private sector, strengthen policy predictability and improve investment incentives, helping both to reduce emissions and to boost growth prospects.
The country has set a target of providing 38.5% of electricity supply through clean sources by 2030 This comes after a recent decline in the share of clean
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energy in electricity generation, despite the country’s abundant renewable energy resources (Figure 4).
Achieving this target will require a substantial increase in private investment, supported by a regulatory environment that provides clarity, stability, and longterm confidence. Modernising and expanding the electricity transmission network, that suffers from grid congestion, is also essential to integrate new clean energy projects and meet rising electricity demand.
Mexico is particularly vulnerable climate change due to its geographic location, ecological diversity and socioeconomic conditions.
Establishing a comprehensive and formal national adaptation plan would help consolidate and update current climate efforts, assess vulnerabilities and integrate adaptation more forcefully into policies. It would provide a clearer basis for quantifying investment needs and also help to coordinate actions across levels of government. This is
particularly important in Mexico, where adaptation responsibilities are shared among federal, state, and municipal levels. Many municipalities lack the technical and financial capacity to fully integrate climate resilience into their planning. Providing them with targeted technical assistance would strengthen local implementation and help reduce regional disparities
Mexico faces growing water stress. This is driven by a combination of rising temperatures, shifting rainfall patterns, increasing demand from population growth and high distribution losses Effective water management depends on accurate, consistent, and timely information on availability, usage, and quality, yet monitoring capacity has weakened due to budget constraints Around 46% of water is lost through leakages caused by aging infrastructure, outdated technologies and insufficient maintenance
Figure 4. Despite high potential, the share of electricity generated from renewables is low
Renewable
B. Photovoltaic (PV) long-term practical potential PVOUT level 1, kWh/kWp/day
Source: OECD Green Growth (database); and World Bank Global Atlas Solar (database).
BOOSTING DIGITALIZATION WOULD BOOST PRODUCTIVITY
Mexico’s digital transformation presents major opportunities to boost productivity and employment. The new Agency for Digital Transformation and Telecommunications can help accelerate reforms to boost digitalisation. To fully realise the benefits of digitalisation, Mexico needs to address persistent challenges, including high concentration in the mobile telecommunications market, low digital adoption among firms, particularly SMEs, cybersecurity vulnerabilities, and limited digital skills.
Sound telecommunication regulation is essential to close connectivity gaps and ensure reliable nationwide infrastructure High spectrum fees contribute to a high market concentration in Mexico’s mobile
telecommunications sector. Reducing spectrum costs can enhance competition, encourage investment and extend coverage. Ensuring a strong pro-competition framework remains critical to advance digitalization. A
recent constitutional reform removed the formal independence of the telecommunications sector regulator. Guaranteeing its full autonomy would boost investor confidence and foster innovation.
An enhanced digital government can streamline public service delivery while reducing bureaucratic costs, delays and corruption The creation of the Agency for Digital Transformation and Telecommunications in 2025 provides a strong foundation for advancing digital government. Priorities include simplifying procedures across all levels of government and digitalising 80% of the most frequently used services. Achieving these goals will require strong efforts at the local level, adequate human and financial resources, enhanced capacity among local government staff, as well as intergovernmental cooperation and support.
Figure 5. Digital skills among adults are weak
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Limited digital skills remain a major barrier to faster digital adoption (Figure 5). Equipping more Mexicans with basic digital skills would support lifelong learning and adaptability in a changing labour market. Expanding the pool of professionals with advanced digital skills would enable more firms to adopt digital tools. Strengthening digital competencies within the public sector would also facilitate the development of more effective digital government services.
Firms lag in adopting advanced digital technologies, including artificial intelligence (AI). Adoption is especially challenging for SMEs. Support programmes should be scaled up and made more comprehensive, offering funding for digital investments as well as technical assistance and training support. Developing a national AI strategy would provide a long-term vision and concrete actions for the development, use, and governance of AI.
Digital skills among active population, from 1 ("not at all") to 7 ("to a great extent"), 2023
