Economics: Revenue shortfalls and an acceleration of spending ahead of 2024 elections are likely to further squeeze public finances

MEXICO - Report 12 Sep 2023 by Mauricio González and Francisco González

Public finances have deteriorated in the last three months. With the presidential elections less than a year away, the administration has been stepping up outlays for social programs and investment in its flagship projects at the same time as there have been public revenue shortfalls as income from petroleum and VAT collections are coming in below what had been projected.

This has led to an expansion of the public deficit, the Public Sector Borrowing Requirements (PSBR) and the Federal Government’s local and foreign currency debt, although the latter of the two has slowed its pace in response to the strengthening of the peso, which appreciated against the dollar an annual 15% in just the last three months (May-July 2023). However, given the significant acceleration of domestic debt, it is expected that total debt will also begin to register more pronounced increases in the coming months, mainly due to spending pressures on items related to social programs and the attempt to accelerate the priority infrastructure works of the current administration, which is intent on giving the appearance of significant progress although they will not be completed before AMLO’s term concludes.

In this week’s Outlook we analyze the recent evolution of public finances. Next week we will turn our attention to the 2024 Economic Package the administration sent Congress on September 8, which includes its General Economic Policy Criteria text, the Revenue Law Bill and the Expenditure Budget Proposal for the coming year.

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