Mexico Projects 3.7% Economic Growth for 2015

Mexico’s government sees the economy accelerating further in 2015 to a 3.7% growth rate, according to a person with knowledge of the matter, as domestic demand keeps recovering from this year’s tax increases and a weak construction sector.

The growth estimate for next year is included in the federal budget the Finance Ministry is sending to Congress late Friday, according to the person.

The 3.7% economic growth would be in line with the consensus of analysts and is an improvement from the 2.7% expansion seen by the government for this year.

Mexico’s economy has shown signs of recovery in the last months, with the economy growing 1% in the April-June period compared with the previous quarter, after a weaker-than-expected beginning of the year.

Since mid-2012, Mexico has posted modest growth as exports to the U.S., Mexico’s main trade partner, slowed down. In 2013, the economy expanded just 1.1%, the slowest pace since the 2009 recession.

The government hopes that the economy is already recovering from across-the-board tax increases that came into force this year, denting consumer and business confidence. The construction sector is also expected to rebound after having contracted in some recent quarters.

The federal budget for next year won’t include any new taxes or tax increases, top Finance Ministry officials have said.

President Enrique Peña Nieto’s government also hopes the recent approval of long-postponed reforms to open up the oil sector and the telecom market to more competition will help attract more investments next year.

On Friday, Mexico’s central bank said economic activity “significantly recovered” during the second quarter, boosted by improving exports, although it warned that some slack in the economy persists. The bank left interest rates unchanged at 3%.

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