Optimistic Mexico 2023 budget forecast may lead to spending cuts-Fitch

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MEXICO CITY — Mexico’s 2023 federal budget, which envisages economic growth of 3% next year, up from a projected 2.4% this year, is optimistic and may eventually require spending cuts, Carlos Morales, sovereign director at Fitch Ratings, said on Friday.

The budget, which finance minister Rogelio Ramirez de la O gave lawmakers Thursday evening, forecast tax revenues of 4.6 trillion pesos ($231 billion) in 2023. It also includes tight public spending, aiming to bring public debt to 49.4% of gross domestic product in 2023.

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Ramirez de la O said the budget was created under the principles of austerity, efficiency and rationality in spending.

The budget “aims for a near zero primary balance and a relatively stable debt trajectory,” said Morales. “However, optimistic growth projections at 3% may lead to lower-than-expected government revenues and require spending cuts to comply with the fiscal deficit target,” he added.

Morales pointed out that higher financing costs coupled with lower oil-related revenues resulted in a deterioration of the 2023 fiscal balance.

Additionally, expenditures are rising due to higher social transfers to Mexico’s vulnerable population and the government’s priority infrastructure projects like the so-called Tren Maya railway, Morales said. (Reporting by Anthony Esposito; Editing by Josie Kao)