Mexico's economic outlook is affected by several factors that negatively impact expectations. Firstly, insecurity and organized crime are affecting businesses, especially medium and small ones, due to issues such as extortion and the collection of fees for protection. Additionally, the high fiscal deficit estimated for 2024, expected to be around 6 percent, with difficulties in reducing it to 3 percent, is also concerning.
Moreover, the challenges in reducing inflation, mainly in the services sector, and the slow pace of decreasing interest rates are generating uncertainty regarding the country's economic prospects. This is compounded by a possible tense relationship with the United States and pressures on Mexico from various fronts, such as migration, fentanyl, the rule of law, and trade with China, ahead of the upcoming renegotiation of the USMCA.
The financial situation of Pemex also raises skepticism, as it is unclear how improvements can be made, nor an increase in production, which has led to a risk aversion that hampers growth potential and employment in Mexico. It is crucial for the Treasury to make adjustments to the deficit to maintain debt/GDP stability and ensure the continuity of social programs and public investments in the medium term.
There is a need for significant deficit reduction that builds confidence among rating agencies and investors, as well as addressing insecurity and improving bilateral relations, especially with the United States. Although the current situation is challenging, the importance of taking measures to reverse the negative outlook and promote the country's economic growth is highlighted.
