The rating agency Moody’s warned that a possible economic recession in the United States would put at risk the growth perspective of the Mexican Gross Domestic Product (GDP).
“If there were to be a negative shock coming from the United States to the Mexican economy, what we see is that this presents a downside risk to our current 2022 forecast of 1.8% growth for the Mexican economy.”, commented Renzo Merino, Moody’s principal analyst for Mexico.
However, the Moody’s analyst stated in a press conference that no further downgrades are expected for Mexico’s credit rating until 2024, when a change in the Mexican government’s administration is expected.
Moody’s downgraded the country’s sovereign rating last Friday from Baa1 to Baa2, while upgrading the outlook for Mexico’s credit profile from “negative” a “steady”.
“We believe that at the Baa2 level, the credit profile could absorb these more negative dynamics, stemming from a possible recession or what could simply be a slowdown in economic activity in the United States and what that would imply for the relationship with the Economy of mexico”, he commented.
In this context, Renzo also considered that Mexican exports to the United States have been a recovery factor for the Mexican economy, especially due to demand between 2021 and 2022, given the disruptions in global supply chains since 2020 due to the pressures of COVID-19.
The Moody’s analyst noted that only a change in the “prudent handling” of the macroeconomy or some indebtedness that is not contemplated until now and subjects the country to financial pressure, would be the factors for which Mexico’s rating would be lowered again.
“These (pressures) could be related, for example, to contingent liabilities materializing and leading to a substantial increase in the debt burden of the Mexican government.”, he narrowed down.
Moody’s forecast that Mexico’s Gross Domestic Product (GDP) will grow an average of 2% annually from 2022 to 2024, so it would return to its pre-pandemic level in 2023, “much later” than similarly rated economies.
These growths come after the historical contraction of 8.2% of Mexico’s GDP in 2020 and the insufficient rebound of 4.8% in 2021.
The last time that Mexico’s sovereign note suffered a downgrade was between March and April 2020, when the three major international rating agencies, Standard & Poor’s (S&P), Fitch and Moody’s downgraded its rating.
Fitch has kept it at BBB- and S&P at BBB, although only last Wednesday Standard & Poor’s ratified Mexico’s rating, but improved the outlook to “steady” from a previous “negative” by acknowledging prudent management of public finances.