The fiscal strategy defined by the Mexican Government in 2024 must be credible after the June elections, as it will be key to defining that the country’s stable outlook is maintained, the rating agency Moody’s warned this Wednesday.
“What we would expect to see is both over the course of next year and that will be key to considering whether the outlook remains stable or not.“is whether the next Administration will be able to present a credible plan and fiscal consolidation,” said Renzo Merino, analyst for Mexico at Moody’s.
The analyst’s comment, made in the “Inside Latam: Mexico 2023” forum, occurs in the midst of growing government spending on social support, especially in pensions for older adults, as well as a global scenario of high interest rates and economic support. increasingly evident to the state-owned Petróleos Mexicanos (Pemex), the most indebted oil company in the world.
In this sense, Merino did not rule out a review of the country’s credit rating within this rating agency in the 2024 election year.
To do this, he explained that they will take into account all the available information, including the proposals made by the presidential candidates.
Last July, Moody’s decided to cut Mexico’s rating to “Baa2” with a “stable” outlookwhile he has warned of greater fiscal pressure for the next Administration, after the presentation of the Mexican budget for 2024 on August 8.
“The spending structure has become more rigid throughout this administration as a result of recurring financial support to Pemex, increased pensions, growing investment in emblematic projects, and higher interest payments,” the president said two weeks ago. sovereign analyst of the rating agency.
Mexico’s credit rating could be at stake next year, since the country is two steps away from losing investment grade by Moody’s, which would make it difficult for them to access more expensive sovereign financing or under conditions of greater pressure.
“This 2024 budget has indeed disrupted the perception we had regarding the fiscal management that we anticipated in the case of Mexico“added Merino.
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For his part, Mauro Leos, associate director of sovereign risk at Moody’s, considered that beyond the presidential elections and their result, it will be fiscal management that may impact the country’s future perspective.
“What is important is what is going to happen in the next six-year term and neither Claudia nor Xóchitl know what is going to happen,” he said. Meanwhile, Moody’s analysts expected that these pressures on spending and a lower level of income, which will leave in 2024 the largest fiscal deficit on record in Mexico, could be reduced by the will and ability of the next administration to apply some reform.
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