SHCP

HR Ratings changed Mexico’s outlook from stable to negative and ratified the short- and long-term sovereign risk ratings, the firm reported in a statement.

This is the second change in perspective for Mexico, since last Thursday, November 14, one day before the Ministry of Finance and Public Credit (SHCP) delivered the 2025 economic package project to the Chamber of Deputies, Moody’s carried out the same change, from stable to negative.

Today, HR Ratings explained that the change is the result of the deterioration in its estimates of economic growth in 2024 and 2025 for Mexico, as well as its expectation of a slower reduction in the fiscal deficit for 2025, compared to what was estimated by the SHCP, which which could put pressure on net debt as a proportion of Gross Domestic Product (GDP).

“The reduction in our growth expectation for the sovereign is the result of the negative behavior that industrial activity has shown during the last 12 months, especially due to the lower dynamism of the construction sector, in addition to a slowdown in the manufacturing sector and lower demand. external,” he assured.

He added that the change of administration expected in January 2025 in the United States could lead to a deterioration in the commercial relationship with Mexico’s main trading partner, and therefore continue to negatively affect the performance of economic behavior.

“With this, we expect economic growth in 2024 to be 1.4 percent and 1.1 percent for 2025, which is lower than expected by the Treasury in the General Criteria of Economic Policy (CGPE25).

In turn, it is less than expected by HR Ratings in April, when an advance of 2.5 and 2.0 percent was estimated for 2024 and 2025, respectively.

He detailed that the decrease in the expectation of economic performance and a greater depreciation of the exchange rate compared to the estimate in April would lead the historical debt balance at the end of 2024 to 52.24 percent of GDP, which is higher than previously expected in the HR Ratings projections of 50.76 percent.

Maintains investment grade

For its part, the SHCP highlighted in a statement that Mexico maintains the investment grade with the eight rating agencies that evaluate its debt.

“During 2024, all of them have ratified the rating of the Mexican sovereign debt, reflecting confidence in the country’s macroeconomic stability,” he stated.

He explained that the change in perspective does not mean a downgrade in the rating, but rather represents a precautionary adjustment to the risk balance that the agency has made.

“We consider that the growth outlook for Mexico is positive, given that supply shocks have begun to decrease and industrial production has shown better dynamism since the second half of the year,” he assured.

“For this reason, our growth forecast, presented in the Economic Package for 2025, remains between 2 and 3 percent, supported by the strength of domestic demand, the support of social programs and investment in strategic sectors,” said the SHCP.

He commented that the Economic Package was prepared on a realistic and prudent basis, considering the current economic situation and both internal and global risks.

He mentioned that projections were established that guarantee responsible fiscal consolidation, both in the short and long term. Mexico is the United States’ main trading partner, and the USMCA provides a framework of certainty for national and international investments.

He stated that the debt of the Government of Mexico maintains a solid attractiveness in international markets, demonstrating a resilient profile in the face of economic fluctuations and financial volatility.

“Additionally, Mexico has the necessary fiscal buffers to mitigate possible adverse scenarios in the global environment, reaffirming the commitment of the Ministry of Finance to prudent management that reaffirms the strength of public finances and the sustainability of the debt,” he concluded.