Sunday, July 13, 2025

Federal budget is overly optimistic about growth and oil production, analysts warn

The macroeconomic assumptions and revenue estimates in the federal government’s 2020 budget are overly optimistic, analysts warn.

Financial experts consulted by the newspaper El Economista said the government is overestimating both its capacity to increase tax revenue and the petroleum production potential of the state oil company.

The budget estimates growth of 1.5% to 2.5% in 2020 and oil output of 1.95 million barrels per day by the end of next year.

To achieve the latter, Pemex will have to increase production by about 17%, the news agency Bloomberg said, something that hasn’t been achieved for almost four decades.

Ariane Ortiz of the ratings agency Moody’s said that the “optimistic” economic growth and oil production forecasts will lead to an “overestimate of government revenue for next year.”

She contended that the government has underestimated the financial support needed by Pemex, which has debt in excess of US $100 billion, and claimed that achieving the primary fiscal surplus target of 0.7% of GDP in 2020 will require austere policies that will make it difficult for the government to stimulate economic growth.

Alberto Ramos, chief Latin American economist at Goldman Sachs in New York, agreed that “the assumptions on growth and oil production are definitely on the optimistic side.”

He said the key question for investors is whether the government will be prepared to cut spending if necessary in order to meet its economic objectives, such as the 0.7% primary surplus.

Marco Oviedo, chief economist for Barclays in Latin America, agreed with Ramos but warned that the government has left itself little room to adjust spending.

Carlos Petersen and Daniel Kerner of the research and consulting firm Eurasia Group said the government’s macroeconomic and revenue estimates are “unrealistic” and should be modified before the budget is approved by Congress.

The 2020 Economic Package, which prioritizes spending on social welfare programs, security and Pemex, was delivered to the lower house of Congress on Sunday by Finance Secretary Arturo Herrera.

Source: El Economista (sp) 

Have something to say? Paid Subscribers get all access to make & read comments.
Ovidio Guzmán

Sinaloa Cartel leader Ovidio Guzmán pleads guilty to drug trafficking and organized crime charges in the US

2
Guzmán also admitted to overseeing the production and smuggling of fentanyl and other drugs as part of his plea deal.
Salinas, California, USA - June 19, 2015: Immigrant (migrant) seasonal farm (field) workers pick and package strawberries directly into boxes in the Salinas Valley of central California

Sheinbaum promises more resources for consulates after ‘unjust’ ICE raids in California

20
The military-style immigration raids on two California farms on Thursday drew sharp criticism and a pledge to action from Mexican President Claudia Sheinbaum.
A small plane flies over the ocean

How the Mexican security minister’s slip of the tongue rankled Salvadoran President Bukele

3
President Bukele took exception after García Harfuch's identified a drug-smuggling plane as coming from El Salvador.
BETA Version - Powered by Perplexity