The Ministry of Finance (MoF) published the preliminary economic policy guidelines, a document that updates the 2024 fiscal forecasts and guides the 2025 Budget due in September. The updated 2024 fiscal deficit forecasts were revised slightly above the approved Budget. The nominal and primary fiscal deficits for 2024 are now projected to reach 5.0% of GDP (previously at 4.9% of GDP) and 1.4% of GDP (previously at 1.2% of GDP), respectively. The widening of the fiscal deficits is explained by higher expenditures (26.9% of GDP, from 26.2% of GDP), which more than offset greater revenues (21.9% of GDP, from 21.3% of GDP). The latter is supported by higher oil prices (despite an expectation of lower oil production) and an assumption of a more depreciated currency, all relative to the approved budget. An improvement in tax revenues also supports the fiscal revenue estimate, despite lower excise gasoline tax revenues expected to smooth retail gasoline prices amid higher energy prices. We note that within fiscal expenditures, the financial cost estimate was reduced which allows for a higher increase in programable expenditure (was increased by 0.7% of GDP). The broadest measure of debt, the Historical Balance of Public Sector Borrowing Requirements (HBPSBR), for this yearend was revised up to 50.2% of GDP (previously at 48.8%).
The expected fiscal consolidation for 2025 remained unchanged (relative to the forecasts announced in the approved 2024 budget) with a primary surplus of 0.9%, while the HBPSBR was projected at 50.2%. We note that the document includes a preliminary list of priority expenditure programs in preparation for the 2025 budget due next September, which includes several of AMLO’s current social priority programs.
Our take: The updated official fiscal forecasts suggest AMLO is pushing further on this year’s expansionary fiscal stance, in the context of the presidential election. Next year’s projected sharp fiscal consolidation seems challenging given programable expenditures would need to fall by 2.7% of GDP, while several priority social programs from the current administration are likely to be included in the 2025 budget and lower revenues ( in an amount 0.6% of GDP) are also expected. Our nominal fiscal deficit forecast of 4.9% of GDP and 2.2% of GDP for this year and the next, respectively, have a slight upward bias (higher deficit) considering the MoF’s new estimates. In the next quarterly fiscal report, due by the end of April, we will have an update of the 2024 fiscal forecasts. However, the 2025 fiscal projections are to be delivered along with the 2025 Budget, due in September.
