Published on Friday, January 13, 2023

Mexico | Questionable assumptions for the stability of public debt

For the stability of the broadest public debt (% of GDP) indicator in the following years, the federal government assumes that public sector borrowing requirements will be reduced from 4.1% in 2023 to 2.7% of GDP in 2024-28 and economic growth forecasts of 2.3% for 2023 and 2.0% for 2024-28.

Key points

  • Key points:
  • Assuming that economic growth were 0.6%, 2.1% and 1.8% in 2023, 2024 and 2025, respectively, and public sector borrowing requirements were kept at 4.1% of GDP in 2024 and 2025, the broadest public debt indicator would be 50.2%, 51.4% and 52.7% of GDP, respectively.
  • Under this risk scenario, the GDP would have to grow 2.3% in 2023 and 4.8% in 2024-25 to keep public debt stable at 49.4% of GDP in 2023-25.
  • To achieve stability of public debt in 2023-25, the federal government anticipates that the primary balance will change from -0.2% in 2023 to 1.0% of GDP in 2024-25.
  • According to the financial planning of the federal government contained in the General Guidelines of Economic Policy for 2023, this would be achieved mainly by lowering public physical investment from 3.6% in 2023 to 2.2% of GDP in the following years.
  • Even though it is true the federal government has more control over physical investment expenditures in the medium-term, it is questionable that public debt stability is based on lower public investment (as percentage of GDP) to avoid affecting current spending. Undoubtedly, this economic policy will be detrimental to the potential growth of the Mexican economy.

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