Mexico City, Mexico — Moody’s Investors Service has downgraded the outlook on Mexico’s credit rating from “stable” to “negative,” while maintaining the country’s sovereign rating at “Baa2.” This adjustment reflects growing concerns over weakening policymaking and institutional challenges that could jeopardize Mexico’s fiscal and economic stability, the rating agency announced in a recent statement.
The shift to a negative outlook signals that Moody’s may consider lowering Mexico’s credit rating in its next review if current trends persist. Despite the reaffirmation of the Baa2 rating, the negative outlook underscores heightened risks associated with the country’s economic management and institutional integrity.
Moody’s cited several factors influencing its decision, highlighting deteriorating debt affordability and increased rigidity in public spending. “Deteriorating debt affordability and increased rigidity in public spending make fiscal consolidation more difficult, following a widening of the public deficit this year, which represents a departure from a long-standing history of low deficits regardless of economic pressures,” the agency stated. This fiscal strain comes on the heels of Mexico’s decision to present its 2025 Economic Package, raising concerns about the country’s ability to manage its budget effectively.
Additionally, Moody’s expressed apprehension over recent constitutional reforms that may undermine the checks and balances of Mexico’s judicial system. The agency warned that such institutional changes could have a detrimental impact on Mexico’s economic and fiscal strength, further complicating efforts to maintain fiscal discipline and economic growth.
Another significant concern for Moody’s is the potential increase in contingent liabilities from state-owned oil company Pemex. The rating agency noted a higher likelihood that these liabilities could materialize on the government’s balance sheet, without addressing the sustainability of Pemex’s long-term debt. This situation poses ongoing fiscal risks for the Mexican government, threatening to strain public finances and limit the country’s economic flexibility.
Despite these challenges, Moody’s reaffirmed the Baa2 rating, citing Mexico’s solid economic fundamentals and the benefits of its diversified economy. The agency acknowledged the potential advantages stemming from nearshoring trends, which are expected to bolster Mexico’s economic resilience and support sustained growth.
“Mexico continues to benefit from solid economic strength that will be supported by the diversity of the economy, as well as by the potential benefits of nearshoring,” Moody’s added in its statement. These positive factors help mitigate some of the fiscal and institutional risks, providing a buffer against potential downgrades in the near future.
The timing of Moody’s announcement, just a day before Mexico’s presentation of the 2025 Economic Package, adds an element of uncertainty to the country’s economic outlook. Investors and policymakers will be closely monitoring how the new economic measures address the concerns raised by the rating agency.
As Mexico navigates these fiscal and institutional challenges, the reaffirmed Baa2 rating and negative outlook from Moody’s serve as a crucial indicator of the country’s current economic health and the potential risks it faces moving forward.
About Moody’s Investors Service
Moody’s Investors Service is a global credit rating, research, and risk analysis firm providing essential intelligence for investors and other market participants. Moody’s opinions express only the views of Moody’s and do not necessarily represent those of the issuer.
