By Diego Oré and Raul Cortes
MEXICO CITY, Oct 2 (Reuters) - The International Monetary Fund said on Friday that greater efforts are needed to put Mexico's debt on a declining trajectory, even as fiscal consolidation continues in 2026, following an Article IV consultation mission to Mexico City in September.
The fund projected Mexico's economy will grow 1.5% in 2026 and 1.8% in 2027, though growth remains constrained mainly by external uncertainty, and called for monetary policy to maintain a moderately
tight stance to lock in disinflation.
• Revenue mobilization, better spending prioritization and greater private sector involvement are needed to protect growth-enhancing investment, the IMF said.
• Headline inflation is near the central bank's target, though core price pressures and inflation expectations remain elevated, the IMF said.
• The IMF warned that geopolitical tensions and the effects of El Niño could add pressure to prices and delay a durable return to Banxico's 3% inflation target until early 2028.
• Banxico held its benchmark interest rate at 6.50% in September and expects inflation to return to its 3% target in the fourth quarter of 2027, though risks remain tilted to the upside.
FISCAL POLICY
• The IMF said Mexico's draft 2027 budget entails a more gradual fiscal consolidation than previously announced and an upward debt trajectory in coming years.
• Mexico's financial system is sound, but improvements to anti-money laundering and counter-terrorism financing frameworks and deeper financial intermediation are needed, the fund added.
• According to the IMF, raising potential growth in Mexico requires closing infrastructure gaps, reducing regulatory burdens and strengthening trade integration, according to the IMF.
• Improving security, combating corruption and lowering informality were also cited as necessary to lift growth potential.
• Mexico's 2027 budget projects public debt rising to 55.0% of GDP from an estimated 54.0% at the end of 2026, even as the government continues its fiscal consolidation efforts.
(Reporting by Diego Ore; Writing by Raul Cortes Fernandez, Editing by Natalia Siniawski)
