* IMF says risks to economic growth to downside
* Needs to boost revenue, productivity, investment
* Says essential for cenbank to communicate well
MEXICO CITY, Nov 28 Mexico must aim for a
balanced budget in 2013 and boost tax revenue to avoid
over-dependence on oil income, the International Monetary Fund
said on Wednesday.
After its annual health check of Mexico's economy, the IMF
said growth in Latin America's second-biggest economy was
holding up due largely to strength in the United States, which
buys almost 80 percent of Mexico's exports.
But the IMF said risks were to the downside, including from
a sudden exodus of foreign investment, and it highlighted the
need for sound management of public finances.
IMF directors "encouraged the return to a balanced budget
under Mexico's fiscal rule in 2013," the IMF said in a report,
calling for increased efforts to raise revenue and reduce
reliance on state oil company Pemex.
Mexico has the lowest tax take in the Organization for
Economic Cooperation and Development, something that credit
ratings agencies have cited as a hindrance to a long-desired
credit upgrade from the current investment-grade BBB, or
President-elect Enrique Pena Nieto, who is to take power on
Saturday, has promised reforms to taxation and a boost to
competition in pursuit of an economic growth rate of 6 percent.
Mexico has not yet released details of its budget for 2013;
for 2012 it approved a deficit representing 0.4 percent of gross
domestic product, excluding investment by Pemex.
The IMF said the Mexican central bank has helped support
growth by keeping rates low at 4.5 percent and said it was
essential to give signals about the right level for rates in the
face of shocks to help keep inflation expectations low.
Inflation has overshot the central bank's 4 percent ceiling
for the last five months, but is now drifting down. Investors
and analysts expect the central bank to keep rates on hold when
it meets on Friday as growth slows in the face of global
The IMF said Mexico, which has averaged just 2.6 percent
annual growth over the last two decades, should focus on reforms
to raise productivity and investment to boost the economy's
potential, as well as security and access to credit.
Mexico has averaged a ratio of private sector credit to GDP
of 26 percent over the last five years, compared with 71 percent
in Chile and 61 percent in Brazil, according to World Bank data,
although it is expanding at double-digit rates.
The country has attracted record foreign investment in
stocks and bonds this year, almost five times more than Brazil
for the nine months to September, and the IMF warned Mexico
should guard against the risk of a reverse. Foreign investors
currently hold about one third of the outstanding stock of local
currency government bonds.
IMF staff also found the real effective exchange rate
consistent with fundamentals, the report said.