Fitch affirms Mexico at ‘BBB-‘, notes “prudent” policies alongside muted growth

Fitch Ratings on Friday affirmed Mexico’s long-term local-currency and foreign-currency issuer default rating (IDR) at ‘BBB-‘, with a stable rating outlook.

“Mexico’s rating is supported by a prudent macroeconomic policy framework, stable and robust external finances, and government debt/GDP projected to remain stable at levels below the ‘BBB’ median,” the ratings agency said in a statement.

Fitch added Mexico’s rating is constrained by weak governance indicators, muted long-term growth, potential micro policy intervention affecting investment prospects, and the possible contingent liabilities from state oil firm Petroleos Mexicanos (Pemex).

It also said it expects President Andres Manuel Lopez Obrador’s government will remain committed to financially supporting Pemex, as part of its priority to strengthen the role of state-owned companies in the energy sector.

There has been seemingly little consistency in how ratings agencies have graded Mexico under the tutelage of Lopez Obrador, a leftist populist who prides himself on being a fiscal conservative.

S&P Global Ratings upped Mexico’s long-term outlook to stable from negative in July and affirmed its BBB long-term foreign currency rating and BBB-plus long-term local currency rating. The same month, Moody’s Investors Service cut Mexico’s credit rating by a notch to “Baa2”, forecasting weak investment.

In Friday’s statement, Fitch forecast Latin America’s second largest economy will grow in real GDP terms by 2.5% in 2022 and 1.4% in 2023.

Fitch also said it expected the Bank of Mexico to continue hiking its key interest rate, projecting it will reach 10.75% by end-2022.

In response to the rating, Mexico’s finance ministry said in a statement it “confirm(ed)” Mexico’s commitment “to the good management of public finances, allowing the continuation of favorable access to international and national markets.”