Market Data 
By Gabriel Burin
BUENOS AIRES (Reuters) – Mexico’s economy is set to grow steadily after June’s presidential election, in line with a decent performance in the United States, while the fiscal front will become more challenging for the new government, a Reuters poll showed.
President Andres Manuel Lopez Obrador’s administration has been pushing up spending in anticipation of the vote, raising concerns among some central bank policymakers worried about the impact on inflation.
Leading the electoral race is ruling party candidate Claudia Sheinbaum, who has touted hikes to the minimum wage and vowed to support state-owned energy companies. At the same time, she also promised fiscal discipline, but has yet to offer detailed plans.
Gross domestic product (GDP) is expected to rise 2.2% this year and 1.9% in 2025, according to median estimates of 34 analysts polled April 8-18. The consensus view for next year was downgraded from a forecast of 2.1% in a January poll.
The main driver should be a continuation of good macro results in the U.S. that would power Mexican exports as well as more remittance flows from the world’s biggest economy, which last year hit a record at $63.3 billion.
“Risks around forecasts are balanced,” said Alberto Ramos, head of Latin America economic research at Goldman Sachs, noting a number of external and domestic uncertainties, compounded by a recent volatility surge in the local currency market.
“But the fiscal picture is going to be less comfortable than the one Lopez Obrador had to manage, and that needs to be fixed through tax reform or expenditure reviews,” Ramos added, also citing Mexico’s heavy set of regulations that limit investments.
%AD-CONTAINER-0%
The odds are looking low, though. A key advisor of Sheinbaum said this month she would not carry out fiscal reforms in the first years of her mandate if elected, focusing instead on improving labor conditions and adopting renewable energies.
Mexico’s overall fiscal deficit is set to end 2024 at 5.9% of GDP, according to figures by the International Monetary Fund, the highest for the country in IMF public finances data series starting in 2015.
Then it would be cut by almost half to 3.0% in 2025 if goals by the current economic team – that Sheinbaum wants to keep – are met as the IMF expects, implying the biggest adjustment among all emerging market and middle income economies tracked by the Fund.
It remains to be seen if and how this effort would include payments to cover losses and debt of state oil company Pemex that rose during Lopez Obrador’s administration, prioritizing it over renewables that are in Sheinbaum’s platform.
Fiscal doubts, persistently elevated inflation, and the U.S. Federal Reserve’s switch to a more vigilant stance on the start of an easing cycle, have led some members of the central bank -known as Banxico – to call for a “cautious” policy ahead.
The Mexican benchmark rate was cut in March by just 25 basis points to 11.0% from a peak of 11.25%. Median estimates in the poll saw a series of 50 basis points reductions in each quarter this year, ending 2024 at 9.50% and 2025 at 7.50%.
%AD-CONTAINER-1%
“Banxico’s policy rate is highly correlated with the U.S. Fed rate. Fewer cuts by the Fed limit Banxico’s room to cut. However, we still expect Banxico to keep cutting rates this year,” BofA analysts wrote in a report.
(For other stories from the Reuters global economic poll:)
