Mexico's economy expanded while its fiscal deficit narrowed in 2004, the government said on Friday, thanks to high oil revenues and prudent spending policies by the government of President Vicente Fox. Fox on Friday said the economy grew 4.2 percent last year, confirming an estimate made by the central bank this week. Although short of his campaign promise for 7 percent annual growth, 2004 was the strongest year of his term, fuelled by US manufacturing demand and a consumer credit boom.
In the fourth quarter of 2004, the economy expanded at a stronger than expected 4.5 percent clip which analysts said bodes well for further expansion this year.
The government budget deficit totalled 19.74 billion pesos ($1.77 billion), or 0.26 percent of gross domestic product, which allowed the government to meet its 2004 target for a budget gap of 0.3 percent of GDP.
Fox has reduced the deficit every year since taking office in 2000 and aims to balance the budget by 2006.
"This supports the message that the credit agencies have given about Mexico's credit quality and that's very good news," said Alberto Bernal, head Latin American strategist at IDEAglobal consulting firm in New York.
Wall Street economists expect slightly slower growth of around 3.8 percent in 2005 as US demand for Mexican exports is expected to slacken a bit, but the economy could do better if domestic demand remains strong.
The world's No. 9 exporter of crude oil sells around 1.95 million barrels per day, much of it to the United States. The government put much of this year's windfall in a special fund that amounts to a nest egg if times get tough.
Mexico's economy is closely tied to that of the United States, and both countries have had problems with job growth. About 318,000 new formal jobs were created last year but the work force is still about 500,000 positions smaller than when Fox took office.
Economists blame the below-target growth and job creation in part on Fox's inability to push economic reforms through the opposition-controlled Congress, including a broad tax increase and a bill aimed at opening up energy-sector investment.