The margin that exists to reduce Mexico’s fiscal deficit in 2025 is one point or a maximum of 1.5 percentage points of the gross domestic product (GDP), which implies lower spending by at least 280 billion pesos compared to that exercised this year. according to Arely Medina, research economist of Economic Studies at Citibanamex, and Jorge Gordillo, director of economic and stock market analysis at CIBanco.
Interviewed separately, they stated that the government will only manage to lower the fiscal deficit from its planned level of 5.9 percent of GDP in 2024 to 5 or 4.4 percent of the product at the end of 2025.
They argued that it would be difficult to reduce it to 3 percent of GDP, as proposed by the Ministry of Finance and Public Credit (SHCP), based solely on the fact that there will no longer be heavy spending on priority infrastructure works that were carried out last six years, such as the Train. Maya.
SHCP data show that the deficit of 5.9 percent of GDP officially forecast for the end of 2024 is the highest in the last 35 years. In 2009, it represented 2 percent of GDP and rose to 3 percent during the Enrique Peña Nieto administration; Then it remained unchanged in the first years of Andrés Manuel López Obrador’s administration, but by 2023 it increased to 4.1 percent, and in 2024, the SHCP expects it to close at 5.9 percent.
No later than next Friday, the agency will deliver the economic package for 2025, that is, the Expenditure Budget and the Income Law of the Federation, in which the government will define the main objectives in fiscal, budgetary, indebtedness and performance matters. the economy for the first full year of the administration that began in October.
One of the expected data is the fiscal deficit that is expected for the end of 2025.
Low growth
They have to present a budget that is credible and that does not affect next year’s economy. At Citibanamex we are anticipating economic growth to be 0.2 in 2025; In an already low growth, implementing a fiscal policy that is countercyclical is going to be counterproductive, it can further discourage economic activity and make annual GDP growth even negative
Arely Medina warned.
For this reason, he explained that lowering the fiscal deficit from 5.9 to 4 or 4.5 percent of GDP would be feasible and credible, since Citibanamex estimates that in 2024 it will be higher than 6 percent.
Within our estimates for 2025, the real scenario is a deficit of 4 percent of GDP, and in another desirable spending scenario, by which we mean covering imminent needs in education, health and infrastructure, the deficit would be 5.9 for 2025
the analyst explained.
For his part, Jorge Gordillo highlighted that if the deficit drops from 6 percent of GDP to 5 or 4 percent, it would send a good signal to rating agencies and investors.
“I don’t think the government can go down from 6 to 3 percent. It is not going to lower social programs, many of them are constitutional, there are ambitious infrastructure plans; The aim is to preserve foreign investment and nearshoring and we have to put a lot of money into the sustainable economy,” he commented.
He said there is still a debt position with a slight cushion, and that the current deficit level is not critical.
We are not at the limit, the country can get into a little more debt. The important thing is the signal that this situation is already being reversed with the hope that the economy will begin to recover in the next six years. The problem is that the rating agencies believe it, that the plan is convincing; Now there is no complete confidence from the investor, the businessman and the government is seen with a doubtful face.
he stated.
He mentioned that public spending increased more than income increased and that it was not reflected in economic growth. They increased the deficit a lot, and it is accompanied by a slowdown in the economy; What is required in that case is to spend more, but they cannot do so and they should not increase the deficit because for the rating agencies what is happening is not sustainable.
he concluded.