Mexico's government presented an austere budget proposal to Congress that includes an improved growth outlook and plans to further restrain spending.
The budget presented by Finance Minister José Antonio Meade on Friday estimates Mexico's economy will expand between 2% to 2.6% this year, up from a previous range of 1.5% and 2.5%. It is the second upward revision in less than six months, and comes just days after the central bank improved its own growth estimates.
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Earlier this year, economists feared that Mexico's economy could fall into recession due to the protectionist policy rhetoric of U.S. President Donald Trump. The peso hit a record low in late January amid concerns over a possible U.S. withdrawal from the North American Free Trade Agreement.
But since Mr. Trump took office, the peso has appreciated close to 18% against the dollar and financial volatility has decreased, the finance ministry said in a statement, as a constructive outcome of the Nafta renegotiation seems more likely now. Domestic demand has remained solid, while manufacturing exports, one of Mexico's key growth engines, have benefited from a weaker peso and rising industrial demand in the U.S.
"The available economic data indicate a significantly better economic performance in 2017 than what was expected at the beginning of the year, " the finance ministry said. For 2018, the economy is expected to grow between 2% and 3%.
Mr. Meade, widely seen as a potential presidential candidate for Mexico's ruling party, said the budget seeks to provide economic stability and certainty to investors.
Mexico began cutting public spending 2015, after a drop in oil prices dented revenue from oil exports.
The government expects to book a primary budget surplus -- which excludes debt payments -- of 0.9% of GDP in 2018, well above the 0.4% surplus expected for this year. Total public debt is expected to fall to 47.3% of GDP in 2018 from the 48% estimated for this year.
Including interest payments, Mexico eyes a budget deficit of 2.3% for this year and 2% for 2018 -- far from the record 4.6% deficit registered in 2014.
Oil production is expected to be 1.98 million barrels per day next year, while the peso is seen at 18.1 to the dollar at the end of 2018. The Mexican currency is currently trading at around 17.7 to the dollar.
Write to Juan Montes at email@example.com
(END) Dow Jones Newswires
September 08, 2017 16:13 ET (20:13 GMT)