Economics: Revenue shortfalls and accelerating spending likely to further squeeze public finances as Hurricane Otis adds to the budget debate

MEXICO - Report 13 Nov 2023 by Mauricio González and Francisco González

Public finance statistics as of September 2023 reflect an increase in spending concentrated in social programs and a stagnation of total revenues because of the contraction of oil revenues. These have jointly led to an expansion of the public deficit of close to 20% in September alone and a cumulative 74.9% in the first nine months of the year. As a result, public debt has continued to expand, mainly due to the internal debt increase, which as of September had risen 13.1% in real terms compared to the end of 2022 and 30% since the beginning of the current administration. The 2024 federal spending budget approved on Thursday is expected to fall short of what is needed and will require modifications that will derail current deficit and debt targets.

In this week’s Economic Outlook we analyze the recent evolution of public finances and what we can expect in the coming years. And in the past week’s economic indicators, we report on industrial activity's proving to be better than expected in September, October’s CPI's delivering the lowest inflation reading in 32 months, and Banco de México's employing a slightly less hawkish tone when extending its rate pause through a fifth consecutive review. Moreover, consumer sentiment continued to firm in September.

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