Economics: The current administration’s record of excess optimism points to what we can expect from the 2023 budget
The main macroeconomic assumptions contained in the government’s General Economic Policy Criteria (CGPE) projections for 2022 proved to be excessively optimistic, just as we predicted when they were handed to Congress last September. Today, the country faces a context marked by steep inflation and high interest rates, the absence of any recovery in investment, a stalling of consumption and an increasing deterioration of producer expectations.
On the level of public finance, year to date as of July, Mexico has registered a relative improvement on both the income and expense sides of the ledger as well as what appears to be a low deficit, which was scaled back by 2.7% in real terms. Nevertheless, the government reported a 661 billion peso increase in gross public debt through the first seven months of the year, largely under the weight of additional local currency debt, despite President López Obrador’s constant claims to the contrary.
The most notable developments on the level of income included an especially pronounced increase in oil revenues largely achieved on the strength of crude prices, but also on a surprisingly positive evolution of income tax and VAT collections in spite of the general state of economic stagnation and weak consumption. However, those gains were partially offset by the deterioration of excise tax income arising out of the subsidy the government began applying early this year. On the level of public spending, we saw a major reassignment of resources from what was originally allocated in the 2022 budget for the president’s priorities in the areas of tourism (Maya Train rail network) and energy (Dos Bocas refinery) and to the detriment of basic services (security, health, education) and autonomous branches.
In this week’s Economic Outlook, we analyze the evolution of public finance through July 2022 and its prospects for the balance of the year. Next week we will analyze the General Economic Policy Criteria text that the government handed Congress on September 8.
Now read on...
Register to sample a report