HR Ratings has become the second agency to downgrade Mexico’s economic outlook in November. The Mexican ratings agency changed its outlook for Mexico’s sovereign rating from stable to negative on Monday. 

 “The change in the outlook from stable to negative is the result of the deterioration in our estimates of economic growth in 2024 and 2025 for Mexico, as well as our expectation of a slower reduction in the fiscal deficit for 2025, compared to that estimated by the Finance Ministry, which could put pressure on net debt as a proportion of Gross Domestic Product (GDP),” said HR Ratings in a press release. 

The rating agency expects economic growth in Mexico of 1.4% in 2024 and 1.1% in 2025, lower than the Finance Ministry’s forecast of 2.1% and 2.3%, respectively.

 HR cited the industrial sector’s negative performance over the last year as a reason for the downgrade, “especially due to the lower dynamism of the construction sector, in addition to a slowdown in the manufacturing sector and lower external demand.” 

Although Mexico aims to reduce its fiscal deficit in 2025, it is difficult to maintain low capital expenditure in the long term without negative consequences for economic performance, said HR. The agency also stressed the potentially negative impact that the coming change in U.S. political leadership could have on Mexico’s trade. 

President-elect Donald Trump will take office in the United States in January 2025.

The New York-based credit rating agency Moody’s Ratings recently downgraded its Mexico outlook from stable to negative but maintained the country’s long-term ratings at the second lowest investment grade level. It said the decision was “driven by our view of a weakening in the policymaking and institutional settings that risks undermining fiscal and economic outcomes.”

Mexico’s Finance Ministry: growth outlook ‘positive’

The Finance Ministry responded to HR’s downgrade in a press release. 

“The growth outlook for Mexico is positive, given that supply shocks have started to decrease, and industrial production has shown greater dynamism during the second half of the year,” it stated. 

 “Our growth forecast, presented in the Economic Package for 2025, remains between 2% and 3%, supported by the strength of domestic demand, the support of social programs and investment in strategic sectors,” the ministry added. 

It also said that the U.S. continues to be Mexico’s main trading partner and highlighted the importance of the USMCA free trade agreement. 

“Mexico has the necessary fiscal buffers to mitigate possible adverse scenarios in the global environment,” the ministry stressed. 

Eight rating agencies that evaluate Mexico’s debt have maintained Mexico’s sovereign debt rating in 2024, the press release stated, which is “a reflection of the confidence in the country’s macroeconomic stability.”

With reports from Expansion, Forbes and El Universal