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Second quarter public finance reading slightly better than expected
In the second quarter, budgetary revenues were higher than projected by
the government. As a result, fiscal authorities could recover some of the
revenue shortfalls of the first quarter due to the recovery of oil related
revenues. On balance, however, the results for the first half of the year,
still remain below the program from January 2002. In the first half, the
accumulated overall public sector balance reached a 23.9 billion peso (US$
2.6 billion) surplus , 73.1% higher in real terms than that registered in
the same period of 2001. The improvement was mainly due to higher
budgetary revenues, which increased 1.4% in real terms compared to the
same period last year, whereas total budgetary expenditures remained
unchanged for the same time period. A 10.8% increase in real terms of tax
revenues in the wake of higher income and excise taxes boosted revenues
and was only partially offset by lower import taxes. In contrast, non-tax
revenues of the federal government declined 35.8% in real terms,
reflecting a fall in royalties and fees paid by state-owned oil company
Petróleos Mexicanos (Pemex). On the expenditure side, the government
continued implementing measures to achieve savings in its administrative
expenditures. The resulting 7.4% reduction of non-programmable
expenditures was thus sufficient to compensate for a 3.9% increase of
programmable expenditures, leaving total expenditures unchanged. Although
the second quarter public finance reading was slightly better than
expected, the Consensus maintained its fiscal deficit forecast for this
year unchanged.
Headline inflation spikes in July but core inflation remains in check
In July, consumer prices added 0.29%. The increase was well ahead of the
Consensus Forecast of 0.14% but below the 0.49% increase registered in
June. Apart from some food items, higher prices for housing, electricity
and tourism services drove the July increase partially compensated for by
lower prices for domestic gas and cars. Because of the July price hike,
annual headline inflation jumped from 4.9% in June to 5.5% in July, more
than a full percentage point above the historic low of 4.4% in December
last year. However, the recent spike in headline inflation is less
dramatic since core inflation maintains its downward trend. In July, the
core inflation index increased 0.14%, which further lowered the annual
core inflation rate from 4.0% in June to the current 3.9%. Panellists have
nevertheless factored the higher headline inflation trend into their
forecasts. The panel also increased its forecast of 2003 inflation a notch
since last month to and thus further away from the Central Bank’s
long-term inflation target of 3.5%.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Mexico. For more details please click here.
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