LatinNews Daily - 30 September 2020

* International credit ratings agency Fitch Ratings has revised its 2020 general government deficit forecast for Mexico to 4.8% of GDP, down from 5.9%, citing “stronger than expected revenues”. Fitch noted that in the draft 2021 budget presented earlier this month, Mexico’s tax revenues proved “resilient”, despite the economic downturn caused by the coronavirus (Covid-19) pandemic. Fitch highlighted the government’s plan to draw down M$236bn (US$10.53bn), or 1% GDP, from its budgetary income stabilisation fund (FEIP), which will raise non-tax revenue to 2.2% GDP, and limit the total 2020 revenue contraction to 0.6%. For 2021, Fitch predicts that the government will further reduce its deficit to below 4% of GDP. Although the government has prioritised fiscal sustainability – with its Covid-19 response package costing just 1.1% of GDP, below the 3.2% regional average calculated by the United Nations Economic Commission for Latin America and the Caribbean (Eclac) – Fitch indicated that Mexico’s total public sector debt will hit a “multi-decade high” of 54.7% GDP in 2020, due to economic contraction and peso depreciation. In its latest global economic outlook, Fitch improved its 2020 GDP growth forecast for Mexico from -10.8% to -9.1%, compared with the 8% contraction projected in the draft budget.

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