Lower deficit suggests stabilization of Mexico's debt ratios

Yesterday, the Ministry of Finance submitted Mexico budget proposal for 2016. The government proposes reducing the fiscal deficit to 3.0% of GDP from the planned 3.5% in the previous year.

It considers an expenditure cut of MXN221bn (1.2% of GDP) with respect to the 2015 budget, very close to estimation. 

The project includes an average price of oil of USD50 per barrel and expects the economy to expand between 2.6% and 3.6% y/y in 2016 (3.1% midpoint).

"As the public deficit continues to decline, debt ratios are expected to stabilize in the coming years as the government plans to reach a deficit of 2.0% of GDP by 2018. However, the government's growth outlook is still very optimistic as it expects to reach at least 3.5% in 2017 and 4.0% thereafter", says Barclays.