Public finances appear solid in Q1, but a detailed examination reveals their fragility going forward.

MEXICO - In Brief 02 May 2025 by Mauricio González
As of March, the fiscal deficit declined sharply. Revenues increased significantly and spending remained on a downward trend, although more moderately. Notwithstanding it is unlikely the annual fiscal targets will be met. In the first quarter of 2025, public finances showed significant improvement.Total revenues accelerated to an 11% year-over-year real growth rate, up from 4.8% recorded in the first two months of the year. Meanwhile, expenditures decreased by 5.9% in real annual terms—a smaller contraction than the previous 17% decline, as anticipated. This resulted in a 70.5% year-over-year real reduction in the broad fiscal deficit, as measured by the Public Sector Borrowing Requirements (PSBR), which stood at -159.2 billion pesos in January−March 2025 compared to -520.4 billion in Q1 2024. The primary balance reached a surplus of 189.8 billion pesos, marking a sharp improvement from the −187.4 billion peso deficit recorded in the same period last year.                                                        Table 1                    Mexico Public Finance  Jan- Mar 2024-2025                           (Billion pesos and real % change) These exceptional revenue and expenditure figures are largely attributable to calendar-related accounting effects and are unlikely to be sustained through the remainder of the year. The RFSP (Revenue-Sharing Federal Spending Budget) projected by SHCP (Mexico's Ministry of Finance and Public Credit) for 2025 is 1.428 trillion pesos (3.9% of GDP). We estimate revenue plus expenses deviations from targets close to $150 billion, which would place the yearly PSBR between 4.5% and 4.8% of GDP. Tax revenues rose exceptionally, driving the over...

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