The federal government has cut its GDP growth forecasts for 2019 and 2020 but maintained its commitment to deliver surpluses in both years.
The Secretariat of Finance and Public Credit (SHCP) predicted in a preliminary 2020 budget document that the economy will grow by between 1.1% and 2.1% this year, down from a previous outlook of 1.5% to 2.5%.
For 2020, the SHCP forecast GDP growth of 1.4% to 2.4%, a cut of 0.7% at both ends of the range.
The department said that the downgraded economic outlooks were the result of low growth in the last quarter of 2018 that extended into the first quarter of 2019.
It hedged its projections by saying it didn’t consider benefits from higher consumer spending that could result from the government’s social programs or a growth boost that could come from infrastructure spending.
However, the SHCP didn’t forecast the size of those potential benefits.
Luis Foncerrada, chief economist at the American Chamber of Commerce México, said the SHCP forecasts are realistic and in line with those of other analysts.
However, President López Obrador said at his morning press conference today that his own government’s projections were too conservative.
“I think their forecast was too low. We’re going to grow at least by an estimated 2% this year . . . and 3% next year,” he said.
“I respect the work of the technicians, the Finance Secretariat,” the president declared before adding that growth above its forecast is “a done deal.”
López Obrador has said repeatedly that his government will achieve 4% growth during its six-year term but based on the midpoints of the latest SHCP projections, Mexico would need to grow by more than 5% annually between 2021 and 2024.
News agency Bloomberg said that is “something even the most optimistic economists don’t see happening.”
The SHCP budget document predicted that total public spending this year will be 5.68 trillion pesos (US $295.8 billion), a reduction of 121.2 billion pesos (US $6.3 billion) compared to 2018 expenditure.
The SHCP said the spending cut is consistent with lower revenue levels forecast in 2019, and a result of adjustments needed to “maintain fiscal goals and balance at Pemex.”
Public spending will rise to just over 5.8 trillion pesos next year, the department said.
The SHCP said the spending cuts will enable the government to deliver primary surpluses of 1% of GDP this year and 1.3% of GDP in 2020.