Mexico’s federal government debt has increased by 3.3 points of GDP from 2019 so far, despite the lack of a countercyclical support program for the economy during the pandemic or on the road to recovery, information from the Institute of International Finance (IIF, for its acronym in English) reveals.
According to their calculations, the public debt of the public sector is equivalent to 38.6% of Mexican GDP, up from 38.3% of the product managed in the second quarter of 2021 and far from the 36.4% of GDP it represents. In the same period in 2019.
However, in the “Global Debt Monitor”, published quarterly by the largest association of global financial institutions, it was noted that the debt managed by the Mexican government compares favorably with the average managed by the world’s governments, which represents 102.3% of GDP. It also compares favorably with the average run by emerging economies, which is 65.6% of GDP.
Sovereign rating agency Moody’s analyst for Mexico, Renzo Merino, has identified strength to rate its sovereign debt burden in relation to other countries with the same rating as Mexico, i.e. it is on “Baa1”. ‘, which is two degrees higher than investment grade.
But he explained that this strength can cause some complications when GDP slows and the interest burden is taken into account.
Detailed information from Mexico’s Institute of International Finance shows that the debt burden of financial firms continues to slow, since at the end of the second quarter of the year it represented 13.3% of GDP. The data contrasts with the 14.6% of GDP that averaged in the same period in 2021.
As with government debt, the debt of financial firms compares favorably with the emerging peer-managed average, which, according to the institute, is 38.4% of GDP and 84.7% of charged GDP worldwide.
IIF data shows that non-financial companies operating in Mexico manage debt equivalent to 23.8% of GDP, which also contrasts with the emerging countries average, which is 101.6%.
According to the institute, Mexican households and households that resorted to indebtedness ran liabilities at 15.5% of GDP at the end of the second quarter, a slight moderation from the 15.75% of GDP they ran in the same period last year.
This liability ratio contrasts with the 46.9% that emerging market households manage on average.
Risks are rising for emerging markets
This month’s report is titled “Rising Risks for Emerging Markets,” referring to the rise in emerging market debt that shows the impact of a sharp economic slowdown that also points to unresolved inflationary pressures.
They warn that expecting higher rates is also a potential risk for debt management in emerging economies and in the face of tightening global financial conditions, which will be particularly affected.
The Institute of International Finance has the largest number of financial institutions operating worldwide, and among its members are BBVA, Grupo Financiero Banorte, Bancolombia, DIFC, Bank of China; Wells Fargo; Santander. Standard & Poor’s; Moody’s Director; Metlife, among others.
The methodology used by the Institute of International Finance to measure debt differs from that used by the Ministry of Finance, which is called the historical balancing of the financial requirements of the public sector, which is expected to amount to 49.9% of GDP at the end of 2023. .