Mexico’s debt, amid stronger-than-expected economic growth and a strong peso, registered a lower level as a percentage of GDP as of June than observed a year ago, according to information released by the Ministry of Finance and Public Credit (SHCP).
In June, the historical balance of SHRFSP was 14.06 trillion pesos, representing an increase of 1% compared to the same month in 2022.
While debt increased as a percentage of GDP, it showed a decline from last year. While in June 2022 it reached 48.8% of GDP, in the first half of this year its level was 45.8%.
According to México Evalúa, the reasons for SHRFSP’s downgrade relate to the peso’s strength against the dollar as well as economic growth that surprised in the first half of the year and even prompted some organizations and institutions to revise their GDP estimates upwards.
“The national currency debt rose to 939,320 million pesos from the previous year, an increase of 9.9%. However, this growth is partially offset by a decrease of 795,320 million pesos (-17.9%) in the debt stock denominated in foreign currency, mainly dollars,” México Evalúa said.
According to data from the Official Journal of the Federation (DOF), in the first half of last year, the dollar was quoted, on average, at 20.28 pesos, while this year it was 18.18 pesos per dollar.
“This represents a 10.3% appreciation of the Mexican peso against the dollar. Put simply, this tells us that if we have $100 of debt worth 2,028 pesos in 2020, by 2023 that same debt will be worth 1,818 pesos. That is, the value of external debt decreased due to a stronger peso revaluation,” said México’s Evalúa.
On the other hand, The value of the peso against the dollar also helped reduce the country’s per capita debt, that is, what each inhabitant owes if the debt is divided among all, according to calculations by the Center for Economic and Budgetary Research (CIEP).
“With regard to public debt per capita, this has been reduced as a result of exchange rate appreciation. As of June of this year, the per capita debt fell to 107,145 pesos compared to 113,719 pesos at the end of 2022,” CIEP analysis said.
This would be the lowest level since June 2019, when in the first year of the government of Andrés Manuel López Obrador, the per capita debt was 106,047 pesos per inhabitant.
Internal debt per capita remained at 79,255 pesos in June, while external debt per capita was 27,890 pesos, the lowest level since 2014, when it stood at 26,732 pesos.
Since the arrival of Andrés Manuel López Obrador to the presidency, one of his policies has been to reduce debt as a percentage of GDP. Although the first year of the six-year term began to see a downward trend, the COVID-19 pandemic and the economic crisis caused the indicator to shoot up to 52.1 percent.
According to Mexico’s Ministry of Finance’s current forecasts, the debt will be 49.9% of GDP at the end of this year and will stay the same the next year.
