Moody's on March 31 affirmed Mexico's A3 issuer andgovernment bond ratings but changed the outlook to negative from stable.
The senior secured and unsecured government bond ratings wereaffirmed at A3, as were the senior unsecured MTN and senior unsecured shelfprogram ratings at (P)A3, Moody's said.
The ratings affirmation was driven by the country's subduedeconomic performance and continued external headwinds that pose challenges tofiscal consolidation efforts and raise the risk of rising debt ratios notstabilizing. They also reflect contingent liabilities like possible support tostate-owned oil firm Pemex, as its liquidity pressures could further underminethe fiscal consolidation process.
Meanwhile, Moody's said the negative outlook balances thestrong commitment to achieve fiscal consolidation and contain Pemex's liquiditypressures against the challenges from a subdued economic activity, the low oilprice environment and implementation risks in the announced measures forlimiting spillover effects from Pemex into the government's balance sheet.
Mexico's long-term local currency country risk ceilings ofAa3 as well as its foreign currency bond ceiling and the foreign currency bankdeposit ceilings at A1 and A3, respectively, were unchanged. The short-termforeign currency bond and deposit ceilings remain at P-1 (Prime-1) and P-2(Prime-2), respectively.
Moody's forecasts only moderate growth of around 2.5% in2016 and 2017 for Mexico, which will challenge the government's fiscalconsolidation efforts. The rating agency also sees a federal government deficitof 2.5% of GDP for 2016 and a gradual decline through 2018 when the deficit islikely to narrow to 2% of GDP.