The Center for Economic Studies of the Private Sector (CEESP) warned about the high economic risks that Mexico faces in 2025, especially in terms of fiscal stability, according to its analysis prior to the delivery of the Economic Package to Congress, scheduled for this Friday, November 15. .
The analysis body of the Business Coordinating Council pointed out in a report that the government could face “unsustainability” in its public finances if it does not adjust its spending policy in the face of an adverse economic environment and increasing budgetary rigidity.
“A significant risk that remains present is the unsustainability of public finances,” the document noted.
According to the CEESP, the forecast to reduce the fiscal deficit from 6% of GDP in 2024 to 3% in 2025 is complicated due to the limited room for maneuver in public spending.
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Despite the savings objectives set by the administration, the analysis detailed that public spending has increased significantly, especially in social programs and pensions, which represent a rigid portion of the budget, difficult to reduce without political costs.
“The increase in public spending does not reflect any type of austerity as the government has constantly indicated, nor will it do so in the new administration. To a large extent it has concentrated on unconditional transfers that are obviously very rigid downwards since their reduction would be very politically costly,” he noted.
In this sense, the report elaborated that the increase in social spending, particularly in the pension program for older adults, will continue to absorb a large part of the resources, coupled with that announced by President Claudia Sheinbaum for older women.
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In 2024, this program represented 85% of the budget of the Ministry of Welfare and a change in this trend is not anticipated, which limits the adjustment options in public spending.
He indicated that an option that the government will surely consider in terms of spending savings is the availability of resources that it will have with the disappearance of the autonomous bodies.
However, he noted, the spending channeled to these bodies represents only 0.1% of total spending: “It is clearly not an important solution.”
“The most feasible thing, as has been on other occasions, would be to limit investment spending, which as a proportion of GDP is at historically low levels, which also complicates the possibility of a downward adjustment, given its importance in the issue. of the infrastructure that is required to promote greater economic growth,” he explained.
Additionally, the CEESP expressed concern about the low economic growth projected for 2025.
Although the official government estimate is 2.5%, the organization recalled that the market estimate is 1.2%, which would negatively impact tax collection and increase pressure on spending.
“It is likely that this difference in the growth rate will lead to lower income tax collection equivalent to nearly 70 billion pesos,” he considered.
Despite the administration’s efforts to contain the debt, the CEESP analysis shows that it grew 62% during the last six-year term, and it is expected that the need for resources will translate into an additional increase in public debt.
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The possibility of significantly cutting spending, CEESP warned, is limited.
The document noted that irreducible spending, which covers salaries, pensions and social programs, represents 70% of total income, leaving little room for adjustments.
Furthermore, he estimated that savings have been suggested through the disappearance of autonomous bodies; However, this would have a minimal impact, since they represent just 0.1% of total public spending.
In this context, the CEESP emphasized the importance of the 2025 budget being based on a realistic macroeconomic framework and adapting to current limitations.
The organization concluded that it is essential to recognize fiscal risks and establish prudent policies that allow the new government to face a challenging financial environment and meet the country’s priority needs, such as health, education and infrastructure investment.
With information from EFE
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