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Wednesday, 6 November, 2002, 06:36 GMT
Mexico predicts modest growth
Mexico
Mexico's recovery is modest
Mexico's economy is to grow at a 3% rate next year, the government has said in a budget proposal to Congress.

Earlier this year, Mexico officially entered recession after its economy shrank during the last six months of 2001, though it has since enjoyed a mild recovery.

But some observers said even such a moderate growth estimate may be too optimistic.

"The 3% figure is a reasonable one, but it is in no way certain because it depends on the United States," said Raul Feliz, an analyst with the Mexican think tank CIDE.

About 85% of Mexico's exports go to the US, so a downturn there would quickly spread south.

Tight spending

The government also said it expects to meet its 3% inflation target next year.

This year, inflation has reached 4.9%, above a 4.5% target.

The 2003 budget will be tight as the government sets out to reduce the deficit from 0.65% of gross domestic product (GDP) in the 2002 budget to 0.5% in next year's budget.

Spending cuts have been proposed to match the government's lower income next year.

This year, the government boosted its earnings by selling 55bn pesos (352m; $550m) worth of state owned companies.

Next year, it will not be mirroring this exercise.

Global oil prices will massively affect the government's income since the state owned Petroleos Mexicanos (Pemex) accounts for one third of the budget.

The government predicts Mexican crude to trade at $17 a barrel in 2003 compared with its $15.50 a barrel estimate for 2002.

See also:

28 Oct 02 | Business
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03 Jul 00 | Americas
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