Mexico | Additional thoughts on the fiscal package

Summary

Previously, I presented some arguments why it seems to me that tax revenues next year could be lower than estimated, which would present the government with the dilemma of having to cut spending or increase indebtedness.

Key points

• Key points:
• If the path of increasing the debt is chosen, in the event that economic growth is close to the market consensus, public debt as a percentage of GDP would increase but would continue at sustainable levels.
• However, there will be less and less room for fiscal maneuvering, largely because the cost of servicing the debt will increase in the coming years.
• The government itself seems to recognize this less room for maneuver by proposing a fiscal deficit of 3.6%, higher than in recent years: between 2020 and 2022 said deficit as a percentage of GDP was 3%.
• Therefore, it will be essential for the next government to implement a plan to increase collection. This should be done by increasing the base and not by increasing tax rates.

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