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MEXICO: 2025 Budget Proposal Seeks Growth While Prioritising Social Programmes

MEXICO
EM BulletMexicoBulletGlobalEmerging Market NewsRegionNorth America
  • In its 2025 budget draft, the government forecasts GDP growth of 2-3% in 2025, following a 1.5-2.5% gain this year. For reference, this compares with analyst forecasts of 1.5% and 1.0% for this year and next, respectively, in the latest Citi survey. Inflation is seen ending this year at 4.3% and next year at 3.5%, which is around 10bp and 30bp, respectively, below analyst estimates in that same Citi survey. The budget pledges support to social programmes, as well as Pemex, and includes spending on a range of infrastructure projects, with a focus on the railway network.
  • The budget also expects the Banxico policy rate to be at 8% by the end of next year, which is in line with market forecasts, while USDMXN is seen ending next year at 18.5, from 19.7 at the end of this year. The 3.9% of GDP fiscal deficit forecast is also close to market estimates prior to the budget of around 4%, down from an estimated 5.9% this year. With the primary surplus estimated to be 0.6% of GDP next year, the debt to GDP ratio is forecast to be 51.4%.
  • Market reaction to the budget has been limited, with USDMXN edging marginally lower since the budget announcement to 20.35. The move leaves the pair 0.3% lower on the day and 1.75% below this week’s highs. Support at the 50-day EMA is at 19.80, while resistance is seen at 20.8072, the Nov 6 high.
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  • In its 2025 budget draft, the government forecasts GDP growth of 2-3% in 2025, following a 1.5-2.5% gain this year. For reference, this compares with analyst forecasts of 1.5% and 1.0% for this year and next, respectively, in the latest Citi survey. Inflation is seen ending this year at 4.3% and next year at 3.5%, which is around 10bp and 30bp, respectively, below analyst estimates in that same Citi survey. The budget pledges support to social programmes, as well as Pemex, and includes spending on a range of infrastructure projects, with a focus on the railway network.
  • The budget also expects the Banxico policy rate to be at 8% by the end of next year, which is in line with market forecasts, while USDMXN is seen ending next year at 18.5, from 19.7 at the end of this year. The 3.9% of GDP fiscal deficit forecast is also close to market estimates prior to the budget of around 4%, down from an estimated 5.9% this year. With the primary surplus estimated to be 0.6% of GDP next year, the debt to GDP ratio is forecast to be 51.4%.
  • Market reaction to the budget has been limited, with USDMXN edging marginally lower since the budget announcement to 20.35. The move leaves the pair 0.3% lower on the day and 1.75% below this week’s highs. Support at the 50-day EMA is at 19.80, while resistance is seen at 20.8072, the Nov 6 high.