The increase in the level of public debt, which rose from 43.6 to 51.4 percent of GDP between 2018 and 2024, is applying pressure on public finances. This highlights the difficulties the government faces in advancing fiscal consolidation. Despite these challenges, the government managed to meet the target of traditional balance deficit at 4.9 percent of GDP for 2024.
The record deficit of 1.66 trillion pesos at the end of 2024, equivalent to 4.9 percent of GDP, reflects a level not seen since the late 1980s. Although the target for the traditional balance was maintained, the increase in Public Sector Financial Requirements (RFSP) is due to non-budgetary factors over which the government has limited short-term leeway.
Regarding income and expenses, both faced upward pressures. Public spending grew by 3.9 percent of GDP between 2018 and 2024, excluding certain items such as pensions and debt interest. On the other hand, tax revenue increased by 1.9 percent of GDP during the same period, due to the rise in ISR, VAT, and IEPS collection.
Fiscal data reflects increasing fiscal pressure accumulated during the previous six-year term. While the initial federal revenue target was exceeded, closing at 22.1 percent of GDP, the primary balance deteriorated significantly, ending in a deficit of 1.5 percent of GDP in 2024.
The quarterly report on public finances for the fourth quarter of 2024 shows that RFSP increased from 2.1 percent of GDP in 2018 to 3.7 percent in 2024, which will require a significant fiscal adjustment by the new administration. The urgency of discussing a tax reform becomes evident to address current fiscal pressures and avoid an increase in government financing costs and those of its enterprises.
