Mexican Finances Remain Strong During 1H22
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Mexican Finances Remain Strong During 1H22

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Paloma Duran By Paloma Duran | Journalist and Industry Analyst - Fri, 09/02/2022 - 07:14

As of July 31, the country's public finances remained at healthy levels, mainly due to a strong performance of oil revenues, tax collection, responsible public spending and efficient management of public debt.

According to the document Public Finances and Public Debt by the Ministry of Finance and Public Credit, the budgetary income of the public sector reached MX$3.86 trillion (US$191.66 billion) from January to July 2022, which is higher than the MX$218.38 billion (US$10.38 billion) expected. The figure represents a growth of 5.3 percent per year in real terms.

The Ministry reported that oil revenues were also above the forecasted figure of MX$134.03 billion (US$6.651 billion) due to the increase of US$38.4/b for crude exports. The figure obtained was 39.3 percent higher in real terms compared to the period from January to July 2021.

Meanwhile, tax collection in 1H22 increased by 1 percent in real terms compared to 1H21. However, the figure was lower than the expected MX$28.62 billion (US$1.42 billion). Excluding the Special Tax on Production and Services of fuels, tax revenues exceeded the MX$200.54 billion (US$9.95 billion) forecasted and registered an annual increase of 11.3 percent in real terms compared to 1H21 results.

In the first half of the year, the government's total net spending was MX$4.1 trillion (US$203.8 billion), which is 3.4 higher than what was collected in 2021. However, the figure is MX$2.88 billion (US$142.67) lower than predicted in the government program.

In the same period, the government recorded a deficit of MX$254.19 billion (US$12.59 billion) in the public balance, a better figure than the forecasted MX$466.77 billion (US$33.12 billion). Finally, the net debt stood at MX$10.8 trillion (US$535.98 billion), of which 78.7 percent is in the national currency. Furthermore, 74.3 percent of government securities are fixed rate and long-term. With these figures, the country has one of the lowest debt levels in Latin America.

However, July was one of the months with the highest inflation so far in 2022. Mexico’s inflation rate hit 8.15 percent, a rise compared to the previous month’s 7.99 percent, reports the National Institute of Statistics and Geography (INEGI). Core inflation increased by 0.62 percent in June, while non-core inflation increased by 1.09 percent. These inflation levels have not been seen since the end of 2000 and could lead the Bank of Mexico (Banxico) to continue to tighten its monetary policy and increase its interest rate by another 75 base points.

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