Macro Analysis /
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Mexico: Fitch affirms Mexico ‘BBB-’ rating, keeping a stable outlook

  • Today, Fitch Ratings affirmed Mexico’s sovereign long-term foreign and local currency credit rating at ‘BBB-’

  • The rating is supported by a prudent macroeconomic stance, robust external finances, and a stable debt/GDP ratio

  • The decision strengthens our confidence that the country will remain ‘investment grade’ in the short- and mid-term

Alejandro Padilla Santana
Alejandro Padilla Santana

Executive Director of Economic Research and Financial Markets Strategy

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Contributors
Leslie Thalia Orozco Velez
Manuel Jimenez Zaldivar
Francisco Jose Flores Serrano
Juan Carlos Alderete Macal
Banorte
18 November 2022
Published byBanorte
  • Fitch Ratings affirmed Mexico’s sovereign long-term foreign and local currency credit rating at ‘BBB-’, with a stable outlook 

  • A prudent macroeconomic stance, robust external finances, and a relatively stable trajectory of debt/GDP keep supporting the rating 

  • On the contrary, the agency identifies long-term growth, Pemex’s fiscal burden, and governance factors are among the main challenges and risks 

  • With this, Fitch endorses its last movement on May 17th, maintaining a very similar tone. The decision strengthens further our confidence that the country will remain as ‘investment grade’ in the short- and mid-term

Fitch Ratings ratifies Mexico's sovereign rating at ‘BBB-’. Today, the agency ratified Mexico's long-term sovereign rating in foreign- and local-currency at 'BBB-', with a stable outlook. The last time they made an announcement was in May, with a similar tone. The agency reiterated the support from a prudent macroeconomic stance, robust external finances, and a better projection for the debt/GDP ratio than for the median of ‘BBB’ countries. Among the most relevant changes in the announcement, we highlight favorable points such as the opportunities stemming from nearshoring efforts and the recent reform to rebuild fiscal buffers. Regarding the first, they expect US and China tensions, maintaining the preference for more resilient supply chains that would benefit our country. On a more negative note, they highlighted greater pressures on expenditures, explaining that “A large increase in pensions […] and the administration's priority social transfer program to older people […], coupled with low government revenue, signal narrowing medium-term fiscal space…”. Also important, they also revised their estimates for Mexico’s GDP, anticipating growth of 2.5% in 2022 and 1.4% in 2023 (Banorte: 2.7% and 1.0%, in the same order). In this backdrop, we reiterate our view that Mexico will remain an investment-grade country in the short- and medium-term, anchored by responsible macroeconomic policies and a conservative fiscal stance, despite some remaining challenges on the horizon.