Mexico | The 2026 Economic Package: the undergoing fiscal consolidation will continue

Summary

The 2026 General Economic Policy Criteria confirm the intention of the federal government to regain fiscal discipline by setting a target of 0.5% of GDP for the primary surplus and look to achieve stability around 52.3% of GDP for public debt, sending a positive signal.

Key points

• Key points:
• Nevertheless, the GDP growth forecasts of 1.1% and 2.3% for 2025 and 2026, respectively, are optimistic in relation to the 0.5% and 1.4% consensus forecasts of economic analysts.
• The elevated public deficit of last year, the highest in the last 40 years, forces a continuation of the fiscal consolidation and leaves the government without room to implement a countercyclical fiscal policy.
• If an economic scenario of lower dynamism more in line with the consensus forecast, Banco de México and the International Monetary Fund happens to be the case, meeting the target for the primary surplus for next year will be harder, making it necessary more cuts to discretionary public spending, a considerable challenge in a context of significant Pemex’s debt amortizations and a reduced fiscal space.
• In the medium term, a fiscal reform will be necessary after taking into account that pressure on public spending will continue from the extension of social programs and pensions’ payments. Mexico is the OECD country with the lowest tax revenue (% of GDP) and one of the lowest among Latin America nations. Moreover, fiscal discipline has been maintained in recent years through cuts to the health and education budgets, which will affect the country's potential growth and limit social mobility.

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