MEXICO CITY (Reuters) – S&P Global Ratings confirmed Mexico’s investment grade credit rating on Wednesday, saying that despite a record hit to the economy from the coronavirus pandemic, the government’s cautious policy response had kept public finances under control.
In a statement, S&P affirmed Mexico’s ‘BBB’ long-term foreign currency and ‘BBB+’ long-term local currency sovereign credit ratings, news that is likely to be welcomed by the government of President Andres Manuel Lopez Obrador.
However, S&P kept Mexico’s outlook on negative, arguing that a likely soft economic recovery and the strained finances of national oil firm Petroleos Mexicanos (Pemex) meant that there was a risk of a downgrade in the coming 12-18 months.
Latin America’s second-biggest economy is expected to shrink by around 9 percent in 2020, and it entered the pandemic already in a mild recession, partly dragged down by concern among investors about some of Lopez Obrador’s policy decisions.
The sharp economic contraction would this year raise Mexico’s general government debt to around 50% of gross domestic product (GDP) from 42% last year, according to S&P.
“(However), the general government deficit should be around 3% of GDP in 2020, much lower than peers given the government’s measured policy response,” S&P wrote.
Next year, the economy is expected to grow just over 3.3%, a central bank poll of economic analysts showed this week.
(Writing by Dave Graham; Reporting by Bengaluru Newsroom; Editing by Frank Jack Daniel)
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