By Mariana Allende | Journalist & Industry Analyst
Mexico’s government has presented the proposed 2025 Economic Package, which aims to reduce the budget deficit to 3.9% of GDP from an estimated 5.9% in 2024, the highest in over three decades. The budget is intended as a return to fiscal discipline, focusing on reducing public spending while maintaining investments in social welfare programs. It was presented to Congress by Finance Minister Rogelio Ramírez de la O on Nov. 15.
The proposed budget for 2025 totals MX$9.07 trillion, reflecting cuts across various sectors, including a 44% reduction in defense spending, with the Ministry of National Defense (SEDENA) receiving MX$151.99 billion, down from MX$259.43 billion in 2024. The Ministry of Security and Citizen Protection (SSPC) will see a 36% decrease, reducing its budget to MX$65.89 billion.
The Economic Package includes the Federal Revenue Law, the Federal Expenditure Budget, and the General Economic Policy Criteria. It is the first budget of President Claudia Sheinbaum’s administration, and expectations are high given the economic challenges she inherited.
The government forecasts that Mexico’s economy will grow between 2% and 3% in 2025, a more optimistic outlook compared to the International Monetary Fund’s (IMF) estimate of 1.3%. The finance ministry supports this forecast with expectations of a strong labor market, robust private consumption, and sustained public and private investment. However, analysts have raised concerns about the feasibility of these figures.
Gabriela Siller, Head Analyst, Banco BASE, pointed out potential risks to investment in Mexico, including geopolitical uncertainties such as the re-election of former US President Donald Trump, who has threatened tariffs on Mexican goods, and domestic political issues such as proposed judicial reforms.
Environmental spending also faces a notable 39% reduction, which is surprising given President Sheinbaum’s background in environmental science and advocacy for climate initiatives. The budget for state oil company Pemex will decrease by 7.5%, though the government plans to allocate MXN 136 billion to support its debt obligations.
Despite the austerity measures, the administration intends to prioritize social programs aimed at reducing inequality. “Our spending plan aims for growth while ensuring support for the most vulnerable,” said Ramírez de la O. The government projects a primary budget surplus of 0.6% of GDP in 2025, shifting from a primary deficit of 1.4% in 2024, signaling a strong commitment to fiscal discipline.
Nevertheless, analysts have expressed doubts about the optimistic macroeconomic assumptions underpinning the budget. The projected GDP growth rate and expectations for a strong peso—anticipated at MX$18.7 per US dollar by the end of 2025—face skepticism. Historical trends suggest that economic performance during the first year of a new administration often falls short of such ambitious targets.
CIBanco analysts noted that while the proposal does suggest a meaningful reduction in the deficit, it might not prevent concerns about economic stagnation. “The economic outlook is optimistic, which should alleviate some fears among investors,” they wrote, though they also cautioned that external factors could complicate these forecasts.
The government aims to maintain a relatively low public deficit, averaging 3% of GDP in subsequent years, to keep public debt stable at around 51.4% of GDP until 2030. While this could signal fiscal responsibility, the projections for oil prices, exchange rates, and GDP growth are seen by analysts as overly hopeful. They have stressed the importance of realistic forecasting to avoid undermining investor confidence.
Moody’s has already downgraded Mexico’s credit outlook to “negative,” and further scrutiny from rating agencies is expected. “A more conservative approach could have been more credible, given the global economic uncertainties,” added a financial expert.
The Economic Package now awaits congressional debate, where President Sheinbaum’s party holds a majority.
Source: Mexico Business News
