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Mexico's austerity-driven 2017 budget looks like it will easily clear its first legislative hurdle on Thursday (Oct. 20), with the lower house set to pass the revenue portion of the budget with no significant changes from the finance ministry's original package, including its mandate for no new taxes.
The standing draft before the lower house budget committee is essentially unchanged from the version presented by the executive branch on September 8 - setting GDP growth at 2-3% in 2017, the US dollar trading at 18.20 to the peso and the price of Mexican petroleum at US$42/barrel.
Heeding the warnings of ratings agencies and economists alike, the budget package as a whole includes 239.7bn pesos (US$12.7bn) in spending cuts, 100bn pesos of which will come from state oil giant (Pemex). It also aims to achieve a current account deficit of -3.0% of GDP (after the -3.2% seen in 2016) and a primary surplus of 0.4% of GDP, central to the government's efforts to turn around a deepening public debt issue.
Finance minister José Antonio Meade acknowledged that public debt could reach 50.5% of GDP in 2016 during a speech before congress in September. Budget watchdog (CIEP) also suggested in a mid-September report that this rate could reach 53% by 2018.
The lower house committee is set to vote on the budget bill Wednesday before the floor vote in the chamber of deputies on Thursday. The senate will have until the end of October to ratify the revenue portion of the budget, as congress then turns its eye to the much more difficult spending bill, which comes up for debate in November.
Budget subcommittees will be finalizing their wording Monday and Tuesday for a number of changes in this year's package that include: a 30% tax credit for technological research and development projects; the gradual liberalization of gasoline prices - a point that may be challenged in the floor debate; and a new tax bracket for businesses owned by individuals earning less than 5mn pesos per year.