Mexico's public sector debt increased by 6.4% annually in 2020 while budget revenues fell by 4.1%, reported last Friday by the Ministry of Finance and Public Credit (SHCP). In the "Reports on the Economic Situation, Public Finances, and Public Debt," the SHCP reported that in December public debt stood at 12.13 trillion pesos up from 11.03 trillion in 2019.
Meanwhile, budget revenues totaled five thousand 339 trillion pesos below the five thousand 385 trillion in 2019. Likewise, the SHCP indicated that public debt reached a ratio of 52.4% of GDP in 2020 compared to the 45.1% level of 2019. Contrary to other middle-income economies, Mexico starts 2021 in a more solid position in terms of public finances, and no additional debt was used in addition to that approved by Congress.
The SHCP published the report hours after revealing the annual contraction of 8.3% of the GDP estimated by the National Institute of Statistics and Geography (Inegi) in original figures. This is within the Treasury's projections, which estimated a decrease of Mexico's economy close to 8 % by 2020, the worst drop since the Great Depression of 1932.
However, compared to other crises such as those of 1995 and 2009, the impacts on employment, inflation, and the exchange rate were lower. This is a testament to the strength of Mexico's economic fundamentals, economic policy, and sound finances.
The Treasury also reported a deficit of 897 billion pesos in the Public Sector Borrowing Requirements (Requerimientos Financieros del Sector Público, RFSP). This is an increase in the public deficit of 57.59 % compared to 2019 when it closed at 569 billion 256 million pesos.
The agency explained that it made a reallocation of resources to address the health emergency, which has left more than 155 thousand deaths and 1.82 million cases of COVID-19 in the country. Therefore, it reported, health spending increased by 51,600 million pesos compared to spending in 2019. Meanwhile, social development spending increased by 3.7% in real annual terms, with a historical figure of 2.9 billion pesos.