Economic Slowdown Puts Mexico’s Fiscal Revenues at Risk
The Mexican economy faces a slowdown in 2024, a situation that is already beginning to show in the country’s public finances. While the Ministry of Finance and Public Credit (SHCP) projects GDP growth between 1.5% and 2.3%—with a central forecast of 1.9%—international organizations such as the Organisation for Economic Co-operation and Development (OECD) expect a considerably lower increase of just 0.4%. According to official estimates, this difference of 1.5 percentage points could translate into a shortfall of up to 76.35 billion pesos in state revenues.
The gap between growth forecasts reflects the complexity of Mexico’s current economic situation. Factors such as the slowdown in manufacturing activity, ongoing weakness in construction, and stagnant domestic consumption have undercut some of the country’s main drivers of economic dynamism. On top of this, weaker exports—a key sector for the Mexican economy—in a context marked by trade uncertainties and slowing global demand, contribute to the headwinds.
Experts warn that the lack of solid growth engines has limited tax collection, affecting both consumption taxes (VAT, IEPS) and income tax revenues (ISR). “When economic activity falls, the tax base also declines, and as a result, public revenues go down,” explains Oscar Ocampo from the Mexican Institute for Competitiveness (IMCO). There are also structural challenges, such as the financial situation of Petróleos Mexicanos (Pemex), whose performance and fluctuations in international oil prices continue to play a key role in national public finances.
Slower growth not only hampers tax collection, but also complicates meeting the fiscal consolidation goals set by the Finance Ministry. Pressure on public spending persists, especially due to increased costs in debt servicing, pensions, social programs, and transfers to state governments. Cutting spending could help close the fiscal gap, but at the same time risks further stalling economic activity, creating a vicious cycle that is hard to break.
In this context, some analysts do not rule out that the federal government might opt to increase debt levels in the coming periods to compensate for declining revenues and meet spending obligations. However, this could worsen the debt-to-GDP ratio—a key metric that markets and rating agencies closely watch when evaluating the country’s macroeconomic stability.
In summary, the lower economic growth expected for 2024 represents a central challenge for Mexico’s fiscal policy, raising the risk of larger deficits and putting additional pressure on the sustainability of public finances. If this scenario persists, authorities will face tough decisions regarding spending cuts, higher debt, or the search for new revenue sources—all in a global economic environment that remains highly uncertain and leaves little room to maneuver.
