Mexico sees budget deficit lower in 2026 as growth ticks up

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MEXICO CITY (Reuters) -Mexico expects its budget deficit to fall slightly in 2026 to 4.10%, as GDP growth is seen ticking up, the finance ministry said on Monday in the government’s budget proposal.

The government has been under pressure to narrow the deficit, which it now expects will close 2025 at 4.32%, while maintaining a pledge to boost social programs and shore up the finances of highly indebted state oil firm Pemex.

The government also forecast Latin America’s second-largest economy to expand between 1.8% and 2.8% – an increase of 1.3 percentage points on both ends of the range.

That is rosier than both the IMF’s growth forecast, which sees a 1.4% expansion in 2026, and the Bank of Mexico’s most recent forecast of 1.1% growth.

The ministry also put its inflation forecast for end-2026 at 3.0%, meeting the target set by the Bank of Mexico, which sees inflation converging to target in the third quarter next year.

Pemex is slated to receive some 263.5 billion Mexican pesos ($14.14 billion) from the government in 2026 to help the firm meet its debt and loan payments, according to the document.

After President Claudia Sheinbaum said last week that her government was considering imposing tariffs on countries such as China that have no trade agreement with Mexico, the budget proposal said the country’s ‘General Import Tax’ would be reviewed for 2026 to encourage national development, without giving any detail.

The draft budget also announced new “healthy taxes” to serve as disincentives for unhealthy products, which would boost taxes on products like soft drinks, video games, and nicotine pouches.

The budget proposal will now be debated by lawmakers in Congress, where Sheinbaum’s party and its allies hold strong majorities in both chambers.

($1 = 18.6348 Mexican pesos)

(Reporting by Brendan O’Boyle; Editing by Stephen Eisenhammer)