If gasoline subsidies continue to contain their prices in the face of the global rise in fuel due to the war between Russia and Ukraine, The collection of the special tax on products and services (IEPS) in the country will be negative in the coming monthsBBVA Mexico estimated.
This is indicated by the financial institution High oil prices help public financesbut high international gasoline prices eliminated the IEPS range of gasoline and diesel.
If this resistance from the federal government continues and global gasoline prices are at levels similar to current levels, Gasoline and diesel IEPS collection may be negative in the following monthssaid the field of enterprise analysis.
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In this sense, it was determined that a 33.3% increase in the international price of conventional gasoline in general has an immediate effect on the assembly of gasoline and diesel IEPs by -72.8%.
He explained, “This increase led to an additional quarterly decrease of 81.7% in the mentioned collection during the subsequent quarter and two quarters after the global price shock for gasoline, and the effect disappears because it is not statistically different from zero.”
However, he noted, it would not be the first time that a government subsidy for gasoline consumption had been observed in Mexico, where it was negatively charged in two periods; The first time between the fourth quarter of 2005 and the fourth quarter of 2008.
For its part, the second example of this type of support was given between the third quarter of 2009 and the third quarter of 2014.
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Similarly, the BBVA explained that although Mexico’s trade relations with Russia and Ukraine are “not relatively strong”, the impact of said conflict is already being felt mainly in public income and consumer prices.
The bank stated that consumer prices will be directly affected by the rise in energy products prices and indirectly by the increase in international prices for grains and minerals.
He estimated that this would affect both core and non-core inflation through higher prices of food and non-food commodities.
Similarly, it considered that higher inflation rates in the short term and increased upward risks to its future direction will be reflected in higher interest rates than previously expected.
“We expect Banxico to raise the benchmark rate again by 50 basis points from 6 to 6.50 per cent this week and to reach levels of 8 per cent at the end of the year,” the bank announced.
In this sense, he explained that higher inflation which would affect the disposable income of the family (if not matched by increases in real wages) and a more restrictive monetary stance to reduce the risks of inflation would limit economic growth.
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