“This year, Mexico is facing a significant fiscal deficit of close to 6% of GDP, which has begun to concern the market and investors,” warned Citi’s Chief Economist for Latin America.

“This year, Mexico is facing a significant fiscal deficit of close to 6% of GDP, which has begun to worry both the market and investors,” warned Citi’s Chief Economist for Latin America, Ernesto Revilla.

He emphasized that in a year where global interest rates are expected to remain high, Mexico will have to deal with one of the two most pronounced deficits among its development peers in the region, just below Brazil.

The economy led by Ignacio Lula Da Silva will record a deficit of 6.9% of GDP this year, which it has been carrying since the pandemic, when it implemented support measures for the population during lockdown, initially aimed at moderating the speed of contagion.

Speaking at the Twentieth edition of the Latin American Treasury and Finance Conference organized by Citi, he highlighted that in a context of high rates and volatility due to geopolitical shocks, this deficit is a cause for concern.

Presenting a diagnosis of the economic situation in Latin America, he said that there are three external factors of major relevance: the trajectory of interest rates in the United States, the price of oil, and the elections in the world’s largest economy.

He projected that the Fed will implement a couple of 25-point rate cuts each toward the latter part of this year.

“As the Fed will remain more hawkish, central banks in the region will be much more cautious to continue with their normalization cycle (of rates).” A hawkish stance, in monetary policy language, indicates no tolerance for inflation and a greater inclination to raise the rate.