Most likely not.
The appearance of a “black swan” can never be ruled out, that is, a national or international event that is surprising, unusual and unforeseen and produces a negative impact on the economy.
But, without said “swan”, today the probability of a economic crisis at the end of the six-year term –abrupt fall of Gross Domestic Product (GDP), inflation annual double or more digits, high real interest rates, devaluation of the exchange rate, solvency problem of the banks– is very low. I would dare say less than 10%.
For AMLO The presidential succession is a priority. He knows that an economic crisis is the best formula to lose power. Therefore, from the beginning, AMLO He has been reasonably disciplined in the management of public finances, an element that we have recognized in this column. In this area, he has been more orthodox neoliberal than irresponsible populist.
Keeping public finances in order has given this government credibility in the financial markets. And here I am referring to the large numbers of the public budget. Unlike other emerging countries, economic stability in Mexico It is patent. And, as I said above, with high probability this will continue until AMLO hand over the band on October 1st of next year.
Last week, the Secretary of Finance presented to Congress his proposal for Economic Package 2024. It does contemplate, as expected in an election year, an increase in public spending. But an irresponsible project is not put on the table either. The variables presented are within reasonable parameters.
The government intends to increase in real terms 4.3% of net spending in 2024 with respect to 2023. A total of nine trillion 66 billion pesos will be spent.
22% of this total will go to pay pensions, an item that continues to grow in the Budget due to the aging society is experiencing. We are talking about one trillion 99 billion pesos. Of this amount, 465 billion will correspond to the social program of universal pensions for older adults. Without a doubt, the next government will have to do something to cover all the existing pensions but, for now, the AMLO He already saved the six-year term with these figures.
As for specific items, highlights include increases for the Secretariat of National Defense (142,150 million pesos) for the work of the Mayan Trainthe Ministry of Energy (171 billion pesos) in order to transfer money to Pemex (which has become a bottomless barrel for the federal government) and the Welfare Secretariat (109,398 billion pesos) aimed at covering the increase in the amounts of this government’s star social program, that is, pensions for older adults.
They are significant increases, but they do not fit into the large numbers of the Budget. The important thing here is that there will not be an excessive increase in the government’s total debt if the Historical Balance of the Financial Requirements of the Public Sector (SHRFSP) is taken into account, that is, the money that, at the end of the day, Tax authorities He has to go out and hire to finance what he could not obtain with the income.
In 2023, according to the Package presented last week, the SHRFSP will reach a level equivalent to 46.5% of GDP. It is expected that in 2024 it will reach 48.8%, 2.3 points more than this year. Yes, the government will take on more debt, but it is a reasonable increase that will leave the country with debt levels below the average of all countries in the world. Latin America and the Caribbean (around 70% of GDP).
Thus, the commitment to responsible management of public debt is maintained (in any case, the criticism that could be made is what the extra debt is being used for, but that is another topic).
Additionally, the debt profile has been improving during this administration. The external has dropped from 22% of the total in 2019 to 16% when this year ends (the rest is internal denominated in pesos). By 2024, the government estimates that the external debt will be entirely at a fixed rate with an average term of 19 years. This is thanks to the fact that they refinanced sovereign bonds in foreign currency that matured between 2021 and 2025.
To the government of AMLO We must recognize his reasonable management of public finances, which contributes to macroeconomic stability and reduces the probability of a crisis at the end of the six-year term. I hope that colleagues who have been predicting an economic apocalypse in 2024 Start correcting your scenarios.
X: @leozuckermann
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