Mexican economic growth will accelerate to 3.7 percent next year before averaging around 5 percent through 2020, lifted by reforms, the government's latest budget plan forecast on Friday. The 4.676 trillion peso ($359 billion) budget for 2015, which must be approved by mid-December, also stuck to a prior deficit goal of 1.0 percent of gross domestic product (GDP), narrowing from this year's expected 1.5 percent shortfall.
President Enrique Pena Nieto has pushed a raft of reforms through Congress to boost growth, ending a 75-year-old state oil monopoly and shaking up a telecoms sector dominated by tycoon Carlos Slim. The government also took steps to boost tax revenues. But growth has fallen short of forecasts, wobbling early in 2014 as a harsh winter hammered US demand for Mexican exports and the tax hikes in Mexico hit consumer spending. Presenting the budget, Finance Minister Luis Videgaray said there would be plenty of support for the economy next year.
"Thanks to resources that stem from (the) fiscal reform it's possible to maintain a historically high level of productive investment in 2015," he told Congress. Second-quarter Mexican growth beat expectations, lifted by a pick-up in industrial activity and domestic demand, and the government is betting on expansion of 2.7 percent in 2014. That figure is more than a percentage point below the original growth forecast for 2014 and the prediction for next year is also a point lower than previously estimated. In 2016, annual growth is seen reaching 4.9 percent, and then holding at 5.2 percent through 2020, the budget says.
Mexico's central bank on Friday kept interest rates on hold at a record low of 3 percent, but highlighted signs that the economy was recovering. Inflation strayed above the central bank's 4 percent tolerance ceiling in July and the first half of August, but policymakers expect the uptick to be temporary.
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