Fitch affirms Mexico credit rating but predicts recession for this year

Fitch Ratings has affirmed Mexico’s sovereign recognition standing astatine the lowest investment-grade level portion forecasting that the Mexican system volition autumn into recession this year.

“Fitch Ratings has affirmed Mexico’s Long-Term Foreign Currency Issuer Default Rating (IDR) astatine ‘BBB-‘ with a Stable Outlook,” the New York-based recognition standing bureau said successful a connection connected Wednesday.

Mexico maintained its investment-grade recognition standing contempt the likelihood of an economical downturn. (María Ruiz)

Fitch besides said that it expects the Mexican system to declaration 0.4% this year.

Why is Mexico’s recognition standing BBB-?

BBB- is the 10th-best sovereign recognition standing issued by Fitch. Mexico is truthful 9 rungs beneath the apical AAA rating.

Among the countries that presently person an AAA standing with Fitch — denoting the lowest anticipation of default hazard — are Switzerland, Germany and Australia. The United States’ standing is AA+, the 2nd highest level.

With a BBB- rating, Mexico’s default hazard is connected par with that of India and Greece, among different countries.

Fitch said connected Wednesday that “Mexico’s standing is supported by a prudent macroeconomic argumentation framework, robust outer finances, and its ample and diversified economy.”

It said that Mexico’s standing is “constrained by muted semipermanent growth, anemic governance indicators, fiscal challenges related to a debased gross basal and budgetary rigidities, and contingent liabilities from Pemex,” the authorities lipid company.

In a connection issued connected Wednesday, Mexico’s Finance Ministry highlighted that Mexico has an investment-grade standing “with the 8 standing agencies that measure its debt.”

That situation, the ministry added, “guarantees favorable entree to planetary fiscal markets.”

Fitch predicts a recession connected the horizon

Fitch said that Mexico is “especially susceptible to U.S. commercialized protectionism, arsenic decades of integration person made exports to its bluish neighbour a mainstay of the system (27% of GDP successful 2024).”

“Tariffs already imposed [on Mexico] could person important impacts, particularly successful the car sector, and the uncertainty is weighing connected activity,” the standing bureau said.

Mexico’s car assemblage is particularly susceptible to disruption from tariffs, Fitch reported. (Volkswagen de México)

Fitch said that the eventual “fate” of the Mexico-U.S. trading narration “is apt to stay unclear astatine slightest until a reappraisal of the USMCA statement scheduled for mid-2026.”

“Even if U.S. tariff argumentation preserves a preferential attraction for Mexico comparative to competitors, we spot dimmer prospects for ‘nearshoring‘ truthful agelong arsenic this uncertainty persists,” it said.

In that context, Fitch is forecasting that the Mexican system volition declaration 0.4% successful 2025 “as tariffs, tariff-induced uncertainty, fiscal adjustments, and a slowdown successful the U.S. measurement connected activity.”

If the Mexican system were to contract, it would beryllium the archetypal recession since 2020, erstwhile Mexico’s GDP plunged 8.5% owed to the COVID pandemic and associated restrictions. The system grew 1.5% successful 2024, but contracted connected a sequential ground successful the past 4th of the year.

Fitch acknowledged that the existent economical outlook is “uncertain and volition hinge connected the caller commercialized narration with the U.S. that emerges.”

“For now, we expect a humble 0.8% betterment successful 2026 arsenic the system continues to digest tariffs and U.S. maturation remains soft,” it said.

What happens with Mexico system successful 2025 depends successful portion connected the results of existent tariff negotiations. (Shutterstock)

Fitch’s forecast for the Mexican system successful 2025 contrasts sharply with those of the International Monetary Fund and the World Bank, which are predicting maturation of 1.4% and 1.5%, respectively. However, some those forecasts were made successful January, earlier United States President Donald Trump imposed tariffs connected imports from Mexico.

For its part, Mexico’s Finance Ministry precocious forecast that the Mexican system volition grow by 1.5-2.3% this year.

Other highlights from Fitch’s report

In the Mexico study it issued connected Wednesday, Fitch Ratings besides commented connected the national government’s Plan México economical initiative, taxation postulation and different issues.

Plan México 

Fitch said that Plan México “seeks to heighten maturation prospects, via a state-led exemplary with information by the backstage assemblage fixed constricted fiscal resources.”

“New energy-sector legislation, for example, bolsters the primacy of nationalist companies but introduces caller modalities for concern with the backstage sector,” it said.

Fitch said it is “unclear however overmuch private-sector uptake determination volition beryllium … fixed concerns astir concern situation that person been aggravated by caller reforms to overhaul the judiciary and dismantle autonomous regulatory bodies.”

Mexico’s fiscal position

Fitch said that “increased societal outlays, nationalist mega-projects” — specified arsenic the Maya Train railroad — “higher involvement costs, and Pemex’s operational losses person worsened … [Mexico’s] fiscal position, lifting the ‘public assemblage borrowing requirements’ … to a record-high 5.7% of GDP successful 2024.”

It added that the Mexican authorities is aiming to trim nationalist borrowing requirements to 3.9% of GDP this year, “via ample cuts” to superior expenditure “following completion of mega-projects and austerity successful operating expenditures adjacent successful precedence areas (health, education, security).”

Tax collection 

Fitch said it believes the Mexico authorities “can execute this year’s fiscal extremity contempt the adverse backdrop” created by U.S. tariffs and tariff threats.

It highlighted that taxation postulation roseate 10% annually successful the archetypal 2 months of 2025 “despite stagnating economical activity.”

Fitch said the higher taxation gross reflects “resilience and imaginable gains from immoderate measures (e.g., taxes connected e-commerce), portion spending cuts stay connected track.”

Mexico News Daily