The Ministry of Finance (MoF) published the Preliminary Economic Policy Guidelines (PEPG), which contains updated fiscal estimates for 2023 and 2024, including the macroeconomic variables used to calculate public finance projections.
The nominal fiscal deficit estimate for 2023 remained at 3.7% of GDP - as in the approved budget. Total revenue estimate for this year fell to 22.8% of GDP (relative to the approved budget figure of 23.2% of GDP), dragged by lower tax (14.8% of GDP, from 15.0% of GDP) and oil revenues (3.8% of GDP, from 4.3% of GDP), with the latter due to a lower oil price estimate and a more appreciated currency forecast. As a result, expenditure estimate fell to 26.4% of GDP (compared to the approved figure of 26.9% of GDP). While the financial cost estimate increased slightly to 3.6% of GDP (previously at 3.5% of GDP) amid a high-rate environment, programmable expenditure forecast is now at 18.9% of GDP (from 19.3% of GDP).
For 2024, the nominal and primary fiscal balances are estimated at a deficit of 2.7% of GDP and a surplus of 0.7% of GDP, respectively. Total fiscal revenues are estimated to increase to 22.9% of GDP in 2024 (from an estimated figure of 22.8% of GDP in 2023) supported by higher tax revenues. Total expenditure is adjusted to 25.6% of GDP for 2024 (from an estimated 26.4% of GDP in 2023) aided by a reduction in programable expenditure (18.1% of GDP, from 18.9% of GDP) and financial cost (3.4% of GDP, from 3.6% of GDP), with the latter explained by a likely lower rate.
Debt-to-GDP ratios are expected to remain stable. The historical balance of the public sector borrowing requirements, the broadest measure of debt, is expected to remain at 49.9% of GDP from 2023 to 2030.
We expect a nominal fiscal deficit of 4.1% of GDP for 2023 (compared with the MoF fiscal estimate of 3.7% of GDP). Our nominal fiscal deficit is wider than the MoF’s figure due to our less optimistic GDP growth assumption (1.8% versus 3.0%) and a more conservative oil production figure. Larger than expected expenditure needs for AMLO’s priority projects is also a downside risk to fiscal accounts.
Julio Ruiz