Economics: Revenue shortfalls and accelerating spending again squeeze public finances, with further deterioration foreseeable this year
Public balances (budgetary, primary and total financial requirements) experienced a significant deterioration in the first month of the year that was in line with the trend of recent months. Although monthly balances tend to be marked by significant volatility, the factors that determined the latest deficit levels will remain in place through the coming months.
The deterioration stems from a considerable increase in spending concentrated in programmable items and lower revenues from both oil and VAT/ income tax collections. And even tax revenues have been sustained exclusively by the excise tax on fuels as the government keeps the price of gasoline artificially high.
On the expenditure side, a sharp increase in investment has gone exclusively into Pemex while other priority areas, such as infrastructure for the provision of drinking water, have been starved of resources. While revenues and spending performed at the beginning of 2024 broadly in line with what had been programmed, the federal budget suggests that additional spending pressures could be generated in the coming months, adding uncertainty to the future soundness of the public accounts.
In this week’s Outlook we analyze the latest data and what we can expect in the coming years. And in the past week’s economic indicators, inflation slowed to its lowest level in three months in February at the same time as consumer confidence was dented by an erosion of optimism as to the country's economic future, while personal consumption expenditures extended their uptrend in December.
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