Little if any revenue growth expected in Mexico's 2021 budget, lawmaker says

MEXICO CITY (Reuters) - The Mexican government’s 2021 spending blueprint will likely forecast revenue similar to this year’s level, or 6.1 trillion pesos ($282 billion), a senior lawmaker said on Monday, modestly boosting health spending but keeping taxes at current levels.

The budget plan, set to be formally unveiled on Tuesday, forecasts a primary deficit but also an improving economy, said Erasmo Gonzalez, the head of the budget committee in the lower house of Congress and a member of the ruling Morena party.

The government’s spending proposal, which will still need to be debated and approved by both chambers of Congress, is expected to boost expenditures on health and other social programs at least in line with inflation as the country continues to battle a growing number of coronavirus cases.

“The health sector will definitely make up a significant portion of federal resources,” Gonzalez, an ally of President Andres Manuel Lopez Obrador, said without going into details.

Health spending will surpass this year’s level and will likely grow above the rate of inflation, he added, as Mexico continues to see rising coronavirus caseloads and deaths.

But “it would be awfully risky to suggest” that the government’s overall expected spending will show an increase in 2021, Gonzalez said, describing the current year’s levels as the best point of “reference” for 2021.

Mexico’s revenue would stay under pressure amid the coronavirus-driven drop in global oil demand, he added. It relies on tax flows from state-oil company Pemex, which has seen its finances stressed largely due to lower crude prices.

Lopez Obrador, a self-described leftist who has nonetheless managed the government’s finances as a fiscal conservative wedded to a policy of austerity that pre-dates the pandemic, has long opposed new tax levies or taking on new debt.

But because of the economic contraction and a weaker peso, the government raised a non-binding limit for gross debt to 70% of GDP, almost 20 percentage points above last year’s level, for the remaining four years of Lopez Obrador’s term, which ends in 2024. The central bank predicts the economy will contract by almost 13% because of the pandemic.

Reporting by Sharay Angulo; Writing by David Alire Garcia; Editing by Kim Coghill and Himani Sarkar