Moody's downgrades Mexico debt rating to Baa3

Ratings agency Moody's on Wednesday downgraded Mexico's sovereign debt rating by one notch to "Baa3," citing a decline in tax revenues amid slowing growth. The agency assigned a "stable" outlook to the rating, from the previous "negative," indicating that it does not expect another downgrade in the coming months.

The decision "reflects a sustained weakening in fiscal strength that accelerated in 2024 and that we expect to persist," Moody's said. It cited government spending levels, a narrow revenue base and continued fiscal support to state-owned petroleum corporation Pemex as factors that limited the government's ability to stabilize its debt.

Moody's said the government's policy priorities, including pursuing energy sovereignty and a redistributive spending model, had weakened the fiscal outlook. "Mexico's fiscal position has weakened relative to Baa-rated peers and its vulnerability to fiscal shocks has increased," the agency said. Moody's expects near-term economic growth "to remain subdued," and to return to around two percent gradually.