Mexico’s government expects the economy to grow by 2.5% to 3.5% next year, in line with this year’s growth. This includes new public aid for the country’s faltering state oil business, according to a budget blueprint unveiled on Friday.
After Brazil, the largest economy in Latin America is expected to increase by 3% this year.
The finance ministry’s 2024 draft budget forecasts headline inflation slowing to 3.8% by the end of next year, confirming a Reuters report, compared with a 4.5% rate of rising consumer prices this year.
A draft seen by Reuters had forecast 2024 economic growth at 2.4%, below the final published figure.
Mexico’s independent central bank, known as Banxico, last week estimated headline inflation at 4.6% by the fourth quarter of this year, with a more dovish prediction for economic growth next year of between 1.3% and 2.9%.
The 2024 budget will now be debated by lawmakers in Congress, where the ruling coalition of President Andres Manuel Lopez Obrador commands majorities in both chambers.
The draft budget estimates the exchange rate for the Mexican peso at 17.6 pesos per dollar by the end of 2024, around its current levels near a 7 1/2-year high, signaling continued strength for the widely traded emerging market currency.
The budget assumes an average oil export price of $56.7 per barrel next year, well below the average of around $68 in the first eight months of 2023.
The key 2024 oil price is used to estimate a large amount of government revenue.
State oil company Pemex’s overall budget will be cut 36%, according to the draft budget from 2023 funding levels.
The budget plan includes a fresh Pemex capital injection of 145 billion pesos ($8.25 billion), which a source told Reuters earlier would be applied to its 2024 debt payments.
The ministry said the capital injection is subject to Pemex maintaining “moderate indebtedness.”
The government push to help service Pemex’s $110.5 billion in financial debt, including $11.2 in debt payments due in 2024, in part aims to ease the firm’s rising financing costs.
The draft budget projects those costs will dip next year by about 4.75 billion pesos ($270 million), or down by 7.6% in inflation-adjusted terms.
The spending blueprint also includes a significant tax cut for heavily indebted Pemex, lowering its DUC profit sharing tax rate to 35% next year, from 40%.