Mexico | Mexico needs a fiscal rule

Summary

The central reflection when analyzing the fiscal package for 2024 is that Mexico needs a fiscal rule. A public deficit of 4.9% of GDP is proposed for 2024, which, if materialized, will be the highest since 1990.

Key points

• Key points:
• Fiscal deficits should not be demonized. Sometimes, they constitute an adequate public policy that allows us to face adverse situations. Surprisingly, one is proposed, and of this magnitude, when at the same time GDP growth is projected above the potential growth rate: a procyclical fiscal policy will be implemented.
• Proposing a deficit in 2024 is also worrying because it will not be allocated to more public investment: almost 70% of the expected increase in the fiscal deficit will go to current spending.
• It is necessary to have clear rules that can result in countercyclical fiscal policies, avoid the interference of the political cycle in fiscal policy, and guarantee that public debt goes to finance infrastructure, not current spending.

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