2022 Budget To Widen Fiscal Deficit In Mexico

• Mexico’s fiscal deficit forecast was revised to 2.7% of GDP in 2021, from 3.0% previously, modestly narrower than the 2.9% deficit in 2020, as revenues have surprised to the upside so far in 2021. A primary surplus of 0.2% was also forecasted compared to the previous 0.0%. 
• In 2020, Mexico’s budget deficit came in at 2.9%, substantially narrower than in most other Latin American markets, as President Andrés Manuel López Obrador (AMLO)’s government refrained from an aggressive stimulus programme during the COVID-19 pandemic. 
• In 2022, the fiscal and primary deficits are expected to widen to -3.3% and -0.3%, respectively, as revenue growth will not keep pace with increases in spending. The public sector borrowing requirement, which is the broadest measure of public finances, is expected to narrow to 3.3% in 2021, from 4.0% in 2020, before widening to 4.0% in 2022. 
• Spending on national oil company Pemex will particularly strain public finances moving forward, though Fitch expects the budget balance will narrow after 2022, stabilizing Mexico’s total debt burden.

(Source: Fitch Solutions)