Moody’s lowers Mexico’s GDP growth outlook for this year to 1.1%

The rating agency Moody’s revised downwards the growth estimate for Mexico this year, and warned that it will not be until 2023 or 2024 that the Gross Domestic Product (GDP) returns to its pre-pandemic level.

In updating the forecasts, the agency changed its projection from 1.5 to 1.1% for this year, already considering the effects that Russia’s invasion of Ukraine may have on Mexico.

The agency pointed out that a factor that has affected the slow recovery of the Mexican economy is the weak investment dynamics, which has been observed since 2018.

He added that the limited fiscal support that was granted to companies during the pandemic, as well as the proposed reforms such as the one in the energy sector, have undermined investor confidence.

This not only limits growth in the short term, but could also affect potential growth in the medium term, through lower capital accumulation and low productivity growth.

The growth update is given online to the revisions that have been made, in the last week, by other institutions. Recently Fitch Ratings lowered its protection from 2.8 to 2.0% for this year.

Tomorrow, the Ministry of Finance and Public Credit will deliver the Pre General Criteria for Economic Policy 2023where the government is expected to lower its growth forecast of 4.1% for this year.

Regarding the country’s credit rating, which remains in a negative outlook, Moody’s He pointed out that Pemex continues to be one of the great challenges because it erodes the country’s fiscal strength.

“The negative outlook on the rating reflects risks to economic growth and government finances. The risks are, in part, a consequence of what we see as a weaker political framework. Sluggish domestic demand, weak investment prospects and limited productivity are weighing on medium-term growth prospects,” he explained.

He added that public finances are exposed both to the risk of lower economic growth and to the possibility that financial support for Pemex be greater than expected. “The current government approach is unlikely to successfully address the strategic challenges of Pemex and those faced by the energy sector in general”.


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