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UPDATE 1-Mexico defends budget, says income and expenses are realistic

Stefanie Eschenbacher

(Adds comments from analyst, finance minister)

MEXICO CITY, Sept 9 (Reuters) - Mexican Finance Minister Arturo Herrera defended his 2020 budget proposal on Monday, insisting that neither income nor expenses were overestimated, despite concerns of some economists that projections for growth and oil production are overly optimistic.

President Andres Manuel Lopez Obrador's second budget since winning office last year aims to boost spending on welfare programs, security and state oil company Pemex, while also eschewing new taxes or fuel price hikes.

"We have presented a realistic budget, without underestimating income or expenditures," Herrera told a news conference. "For a very long period, income was underestimated in a more or less systematic way, so that there was always surplus income at the end of the year."

The administration cautiously freed up funds for spending, targeting a primary fiscal surplus of 0.7% of gross domestic product, below earlier targets.

Some private economists took the view that while the primary surplus target was credible, Herrera's forecast of 1.5%-2.5% GDP growth next year could be hard to achieve after three stagnant quarters.

Forecasts for higher oil production from highly indebted Pemex were also on the upper end of the possible, economists said.

Alberto Ramos, head of Latin American research at Goldman Sachs in New York, warned that the minister's plan for raising revenue without new taxes may also include some wishful thinking.

"The government may be overly optimistic about its capacity to raise tax revenue, close loopholes, tackle evasion and non-compliance, and its capacity to further compress operational expenditure," he said in a client note. (Reporting by Stefanie Eschenbacher; additional reporting by Diego Ore and Sharay Angulo; writing by Julia Love; Editing by Dave Graham and Dan Grebler)