The forecasts of the Ministry of Finance for the elaboration of the 2023 Economic Package , in addition to being optimistic, must consider the sensitivity of the economy to the high levels of volatility and uncertainty that prevail in the financial markets, since a new war, another variant of the covid or higher inflation rates may alter the originally estimated figures.
In the General Economic Policy Criteria for the Income Law Initiative that Secretary Rogelio Ramírez de la O delivered last week to the Congress of the Union, the Treasury admits having a “prudent” macroeconomic framework, however it presents a sensitivity analysis to estimate the impact that the deviations of the main macro variables could have on the estimates of income and expenses for 2023.
A variation of half a point in economic growth in 2023 would mean an impact of 23,090 million pesos (mdp). A higher than estimated growth benefits the obtaining of public resources through the collection of taxes such as ISR and VAT.
For next year, the Treasury estimates that the Gross Domestic Product (GDP) will grow 3%.
What if the dollar goes up?
An increase of one dollar in the price of oil has a benefit in revenues from crude oil exports of 13,116 million pesos, which represent 0.05% of GDP, and according to the Treasury, this benefit is greater than the import expenses that Pemex would have.
For 2023, the Treasury projects 1.87 million barrels of crude oil per day in oil production on average, with an average price estimated at 68.7 dollars per barrel.
The current forecast is for the peso-dollar exchange rate to be at 20.6 both this year and next year.
Impact of rising interest rates
Treasury indicates that a rise of 100 basis points in the interest rate would imply an extra disbursement of 30,218 million pesos, since the non-programmable expense of the public sector is increased by increasing the payment of interest on the debt at a variable rate and refinancing costs. of liabilities close to maturity.
higher oil production
A higher production of Mexican oil by 50 million barrels per day on average has an impact on oil revenues due to higher sales of the hydrocarbon.
Under this projection, the Treasury would estimate an extra income of 24,583 million pesos.
“In addition to the situations described above, there are factors that could affect public finances and that, due to their nature, could be difficult to anticipate. For this reason, the Government of Mexico has a set of fiscal buffers in order to reduce the impact that these could have on the country’s public finances, “says the Treasury.
Among these measures are the oil hedging strategy to cover 100% of the Federal Government’s income exposure to reductions in crude oil prices; the Flexible Credit line by the IMF of 50,000 million dollars; the swap line with the Fed for 3,000 million dollars; the swap line with the US Treasury for 9,000 million dollars and the international reserves for 198,800 million dollars as of August 26, 2022.