Mexican economy seen growing 4.6% in 2021 in draft budget plan By Reuters

China's efforts to resolve financial risks slowed by virus



By Diego Oré and Stefanie Eschenbacher

MEXICO CITY (Reuters) – Mexico’s economy will likely grow by 4.6% next year, according to a draft budget proposal published on Tuesday, suggesting the road to recovery will be long and arduous for one of the countries worst hit by the coronavirus pandemic.

Mexico faces a tricky balancing act of reviving an economy battered by the pandemic while also sticking to President Andres Manuel Lopez Obrador’s commitment to austerity.

The finance ministry draft, which was made public by officials at the lower house of Congress, also predicts that Mexico’s primary budget balance – the calculation which excludes interest payments on existing debt – will be nil next year.

Lopez Obrador is an outlier among both wealthy and emerging nations, insisting on keeping spending tight even in the face of the economic destruction wrought by coronavirus lockdown.

The economy he promised to revive is in the deepest slump since the 1930s Great Depression. Mexico’s central bank recently warned it could contract by 13% this year.

Finance ministry officials are due to present the budget plan to the lower house later on Tuesday, and investors in both Mexico and the debt of ailing state oil company Petroleos Mexicanos will scrutinize spending priorities.

While regional peer Brazil has splurged an additional 6.5% of GDP on spending including unemployment benefits that reach a third of its citizens, Mexico’s spending balance has deteriorated by less than 1% during the pandemic.

Lopez Obrador has given no sign of changing course, arguing his discipline will eventually leave healthier finances, while ruling out more taxes or new social programs.

Mexico was already in a recession before the pandemic.

In the central bank’s most optimistic scenario, Latin America’s second-largest economy will be smaller at the end of next year than before the pandemic roiled the Americas.

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