Economics: Positive results for EPN’s public finance handling
As we near the end of the six-year administration of President Enrique Peña Nieto, we can draw a generally favorable balance sheet of its handling of government finances. His government grew tax revenues consistently between the time it took office at the end of 2012 until 2016, including 27.4% growth in 2015 primarily related to increased collections of income tax and excise taxes on gasoline and diesel. Budgetary revenues also grew steadily, albeit moderately under President Enrique Peña Nieto’s watch. However, without a new fiscal reform – something the incoming administration is apparently ruling out at least during its first three years in office – that growth may be coming to an end.
Public spending rose and fell over the course of the outgoing administration as officials sought a combination of strategies that would favor a greater injection of resources into Mexico, but by 2016 they had shifted gears and prioritized a search for fiscal stability. That year the Mexican government sharply reduced public spending and succeeded in lowering the 2017 debt to 46.3% of GDP, an exercise in fiscal discipline that proved important for sending a signal of stability to ratings agencies.
During the past six years, public spending tended to surpass revenues, thereby leading to a yawning fiscal deficit that was aggravated by shortfalls in petroleum income, expanding net public debt in a move that prompted major international ratings agencies to lower their outlook on Mexican public debt from stable to negative. A sharp reduction in public spending and debt in 2016 and 2017 made it possible to convince ratings agencies to raise their outlook and even to assign government debt their highest ratings on record. However, more recently those same agencies changed course again by lowering their outlook on Mexican debt to negative after the incoming government announced the cancellation of the new Mexico City international airport, and financial markets were spooked by abrupt bills and other troubling initiatives by López Obrador loyalists in Congress.
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