Mexico | Economic package projects gradual progress in fiscal consolidation

Summary

The 2027 economic package projects a gradual fiscal consolidation with a wide deficit of -3.9% of GDP. Despite fiscal prudence, challenges remain due to low tax collection and spending rigidity. Seeking revenue growth without a comprehensive reform limits fiscal space for more public investment.

Key points

• Key points:
• The Public Sector Borrowing Requirements (PSBR) are estimated at -3.9% of GDP for 2027, a more gradual target than the previously forecast -3.5%.
• Public physical investment spending is projected not to be sacrificed, reaching 2.6% of GDP in 2027 to support future economic growth.
• At 18.3% of GDP in 2024, Mexico has the lowest tax revenue in the OECD and one of the lowest in Latin America, which limits fiscal space.
• The cost of public debt service will increase to 4.0% of GDP in 2027, up from 3.7% in 2026, despite projections of lower interest rates.
• There is a risk in the inflation and interest rate projections; a 100 basis points increase in the rate would imply an additional financial cost of 37.9 billion pesos.

Geographies

Topics

Tags