Mexican Budget Deficit to Widen In 2023 as Infrastructure Spending Ramps Up

• Fitch Solutions is forecasting that the Mexican budget deficit will widen modestly from 3.4% of GDP in 2022 to 3.8% in 2023. 
• Mexico is an unusual case in that the deficit barely widened in response to the COVID crisis (from 1.7% in 2019 to 2.8% in 2020), as President Andrés Manuel López Obrador’s (AMLO) government refrained from rolling out significant income support schemes.
• Mexico’s fiscal position has, however, deteriorated somewhat, driven by a ramp-up in public investment, an uptick in debt servicing costs and a modest increase in social spending that largely reflects an increase in pension payments and the rollout of some cost of living support.
• Fitch, therefore, anticipates that these trends will remain in place ahead of elections scheduled for July 2024, with a decline in oil-related revenues set to exacerbate the deterioration.
• Owing to the widening budget deficit, Fitch also anticipates that Mexico’s debt-to-GDP ratio will increase modestly from 50.0% of GDP in 2022 to 50.6% in 2023, with strong nominal economic growth helping to prevent a larger jump.

(Source: Fitch Solutions)