30.4 C
New York
Wednesday, June 19, 2024

Buy now

Moody’s cuts Mexico’s credit standing by one notch, however improves outlook

MEXICO CITY, July 8 (Reuters) – Moody’s Traders Service on Friday lower Mexico’s credit standing by one notch because it expects weak funding prospects and elevated structural rigidities to constrain exercise in Latin America’s second-largest financial system.

Edging nearer to speculative grade, Mexico’s senior unsecured long-term score is now “Baa2”.

“The financial scarring that occurred in the course of the pandemic is not going to be reversed and, consequently, there can be a persistent hole between the pre-pandemic pattern degree for GDP and present estimates for 2022-24,” the company mentioned in a notice.

Register now for FREE limitless entry to Reuters.com

Weak funding dynamics have been an necessary driver of financial underperformance, particularly since 2018, when Andres Manuel Lopez Obrador was elected president, mentioned Moody’s.

“This, together with a constrained fiscal assist bundle, have contributed to a lagged financial restoration from the pandemic shock,” it added.

Within the absence of unanticipated shocks and assuming rising financial and financial pressures, the company modified Mexico’soutlook to “secure”, arguing that the credit score profile will stay aligned with similarly-rated governments by the tip of the present administration.

It additionally famous that prudent fiscal administration beneath austere Lopez Obrador has restricted the deterioration within the authorities’s debt burden.

Reiterating its promise to strengthen public funds and preserve a lit on debt, the finance ministry responded in an announcement that the nation has the “monetary shock absorbers” to resist international dangers.

Julio Ruiz, chief economist for Mexico at Brazilian financial institution Itau, argued the Mexican financial system nonetheless had a protracted solution to go to achieve its pre-pandemic ranges.

“Assuming a context the place exterior elements are favorable, on the very least corporations would want extra certainty from the federal government to extend funding,” mentioned the previous finance ministry official. “There cannot be fixed coverage adjustments.”

Earlier this week, rival rankings company S&P World Rankings lifted Mexico’s credit score outlook to “secure” from “damaging” on fiscal and financial coverage enhancements, and what it referred to as “much less uncertainty about power coverage”.

Lopez Obrador failed earlier this yr to push by a controversial constitutional electrical energy overhaul.

Register now for FREE limitless entry to Reuters.com

Reporting by Arunima Kumar in Bengaluru and Stefanie Eschenbacher in Mexico Metropolis; Modifying by Devika Syamnath and Diane Craft

Our Requirements: The Thomson Reuters Belief Rules.

Supply hyperlink

Related Articles

Stay Connected

- Advertisement -

Latest Articles