Fitch Ratings on Dec. 9 revised the ratings outlook on Mexico to negative from stable as the country faces risks on its growth outlook which could impact the stabilization of its public debt burden.
Mexico's underperforming growth compared to peers is accompanied by an increasing general government debt burden, Fitch said. Meanwhile, the plans of U.S. President-elect Donald Trump to tighten trade and immigration policies have also posed uncertainty and asset price volatility in Mexico.
Fitch reduced its growth forecast for Mexico to below 2% for 2017, as it sees domestic demand and economic growth burdened by higher economic uncertainty.
Meanwhile, the continued rise in the government burden is driven by weak growth and primary deficits in recent years along with one-off issuance of debt to the productive enterprises of the state, Fitch said. The rating agency expects general government debt to hit around 47% of GDP in 2017, highlighting the steady erosion of fiscal flexibility to confront shocks.
Still, Fitch maintained Mexico's long-term foreign and local currency issuer default ratings at BBB+, country ceiling at A and short-term foreign and local currency issuer default ratings at F2.
The country's BBB+ ratings balance a diversified economic base and a track record of disciplined economic policies that has anchored macroeconomic stability and curbed imbalances with historically moderate economic growth, structural weaknesses in its public finances, a relatively low level of financial intermediation and institutional weaknesses highlighted by the high incidence of drug-related violence and corruption.