Economics: Immediate 2023 public finance results confirm there were no major departures from trends of the previous year
The gradual but systematic deterioration of public finances continued to unfold over the course of 2023. The results came as no surprise, as the 2023 numbers had been anticipated throughout most of 2023. However, the way some components are trending is troubling: increasingly negative public balances (primary, budgetary and total financial requirements); revenue growth's failure to keep pace with expenditures, particularly in the case of the so-called "obligatory" ones; and a substantial expansion of local currency public debt, especially that of the Federal Government.
In the medium term, such liabilities could translate into severe problems for government finances, eventually affecting the country's sovereign debt rating and the government's borrowing capacity and ability to cover debt costs. It also confirms that some parastatal companies, especially Pemex and CFE, constitute "a bottomless barrel". Looking ahead to the remainder of 2024 and 2025, we need to be alert to the chances that several new sources of major pressure on public finances may emerge.
This week we analyze the main aspects of 2023 federal public sector finances and their implications. In other economic news last week, preliminary data showed GDP growth slowed to 2.4% in the fourth quarter as tertiary sector activity softened, but industrial activity firmed thanks to the continuing rally in construction. Private consumption keeps rising as the GFI report for November showed such investment continued to expand through the first 11 months of the year.
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