MEXICO CITY (Reuters) – Mexico’s economy “could easily” grow more than 5% in 2021, the finance ministry said on Monday, adding that the government aims to come up with ways to reduce tax evasion before discussing potential tax reform.
The COVID-19 vaccine rollout and the impact of the United States’ $1.9 trillion stimulus package should boost the economy, Finance Minister Arturo Herrera told students at the National Autonomous University of Mexico (UNAM).
Mexico in 2020 suffered its steepest recession in almost 90 years due to the pandemic, with gross domestic product (GDP)shrinking by some 8.5%. Still, Latin America’s no. 2 economy grew quicker than first estimated in the final quarter.
In view of all those factors, the economy “could easily grow above 5.0%,” Herrera said in a presentation.
He also expected to see higher tax revenues and crude oil prices, as well as for debt levels to start falling.
Separately, Deputy Finance Minister Gabriel Yorio told UNAM students the government wants to “close the (tax) evasion gap” before discussing a potential tax overhaul.
“I think there’s room to reconfigure the structure without the need to increase taxes, and to make the country’s tax structure more progressive,” said Yorio.
While Mexico has long suffered from a weak tax take, President Andres Manuel Lopez Obrador pledged not to increase the overall tax burden in the first three years of his government. That period ends in December.
Mexico’s tax revenue as a percentage of GDP is the lowest in the 37-nation Organisation for Economic Cooperation and Development. The International Monetary Fund has proposed Mexico reform its tax system to support spending and the economy.
Herrera told Reuters earlier in March that the government will study the need for tax reform this year and is talking to regional authorities about their fiscal requirements.
(Reporting by Anthony Esposito, Dave Graham and Adriana Barrera; writing by Cassandra Garrison and Anthony Esposito; Editing by Sonya Hepinstall)