Overview of the Federal Budget Outlays Project for 2026
According to the Federal Budget Outlays Project (PPEF) for 2026, federal transfers to states and municipalities are projected to grow by 3.0% in real terms compared to the 2025 budget, amounting to 2.8 trillion pesos.
Understanding Federalized Spending
Federalized spending, also known as gasto federalizado, accounts for approximately 85% of the total income of federated entities before the pandemic, excluding resources from financing and the City of Mexico (which receives 56%).
- Federalized spending includes participations, contributions, and other concepts.
- Participations federales, a significant portion of federalized spending, are part of non-programmable expenditure (free resources for local administrations) and depend on federal participable revenue, economic activity, and population.
Projected Growth in Participations Federales
In the PPEF 2026, participations federales are estimated to reach 1.5 trillion pesos, constituting 51.8% of the total federalized spending.
- This represents a real growth of 5.0% (115,800 million pesos) compared to the previous year.
- The projected growth in participations federales aligns with the estimated Gross Domestic Product (GDP) growth of 2.3% for Mexico in 2026, which is higher than the 1.0% projection in the 2025 Economic Package.
Economic Outlook and the Importance of Plan México
The Criterios Generales de Política Económica 2026 document states that Mexico’s economy will regain a more robust growth trajectory in 2026, driven by sustained domestic demand and a more favorable international environment with less uncertainty around trade policies.
- Plan México will be the primary instrument for the federal government to promote equitable and sustainable economic growth, focusing on increasing domestic production, substituting imports, regional development, productive innovation, and transitioning to a more inclusive, resilient, and environmentally responsible economy.
Anticipated Improvement in Key Components of Aggregate Demand
The PPEF 2026 anticipates better performance from the main components of aggregate demand: national investment and private consumption.
- Private investment, although affected by volatility and uncertainty around trade policies, will start to normalize as there is greater clarity on tariff treatment and conditions of trade agreements.
- Public investment is expected to advance strategic projects, such as passenger train constructions (AIFA-Pachuca and Querétaro-Irapuato), road constructions (Ciudad Valles-Tampico and Saltillo-Monclova), modernization of highways (Atizapán-Atlacomulco and Uruapan-Nueva Italia), agricultural technological advancement programs, and strategic water infrastructure projects (presa El Novillo in Baja California Sur and acueducto Solís-León in Guanajuato).
Aportaciones Federales: Programmable and Other Concepts
Aportaciones federales, which cover programmable (tagged) expenditure addressing various state issues in education, health, social infrastructure, security, and financial strengthening, amount to 1.1 trillion pesos.
- This represents a real growth of 2.6% compared to the previous year’s budget.
- The “other concepts” category, primarily subsidies, is expected to decrease by 6.2% in real terms to 227,700 million pesos.
Key Questions and Answers
- What is federalized spending? Federalized spending, or gasto federalizado, refers to approximately 85% of the total income of federated entities before the pandemic, excluding financing resources and the City of Mexico’s share.
- What is the projected growth in federal transfers to states and municipalities? Federal transfers are expected to grow by 3.0% in real terms compared to the 2025 budget, reaching 2.8 trillion pesos in 2026.
- What is the significance of participations federales? Participations federales, a crucial part of federalized spending, account for around 51.8% of the total and are non-programmable resources for local administrations, dependent on federal participable revenue, economic activity, and population.
- How does the PPEF 2026 anticipate economic growth? The PPEF 2026 projects a 2.3% real GDP growth for Mexico in 2026, driven by sustained domestic demand and a more favorable international environment.
- What role does Plan México play in the economy? Plan México is the primary instrument for promoting equitable and sustainable economic growth, focusing on increasing domestic production, substituting imports, regional development, productive innovation, and transitioning to a more inclusive, resilient, and environmentally responsible economy.
