Fitch Ratings has affirmed Mexico’s long-term foreign currency issuer default rating (IDR) at ‘BBB-‘ with a Stable Outlook. The rating is underpinned by a prudent macroeconomic policy framework, robust external finances, and a large, diversified economy. Constraints include muted long-term growth prospects, weak governance indicators, fiscal challenges stemming from a low revenue base and budgetary rigidities, and contingent liabilities related to Pemex.
The Stable Outlook reflects Fitch’s assessment that the current rating can withstand the anticipated economic headwinds. While an ongoing economic slowdown is expected to be exacerbated by increased trade protectionism in the U.S., these factors are projected to reinforce existing growth limitations rather than cause a significant and lasting deterioration. The agency anticipates that the Sheinbaum administration will maintain its fiscal consolidation objectives despite the challenging environment.
Mexico remains particularly vulnerable to U.S. trade protectionism, given the significant integration of its economy with that of its northern neighbor, with exports to the U.S. accounting for 27% of GDP in 2024. Existing tariffs could have substantial effects, particularly in the automotive sector, and the prevailing uncertainty is dampening economic activity. The future of the trade relationship is expected to remain unclear until the USMCA agreement is reviewed in mid-2026. Even if U.S. tariff policy continues to favor Mexico relative to its competitors, the prospects for nearshoring are diminished by the ongoing uncertainty.
Real GDP growth slowed to 1.5% in 2024, concluding the year with a contraction of 0.6% quarter-on-quarter (seasonally adjusted) in the fourth quarter, attributed to decreased public investment and heightened uncertainty. A contraction of 0.4% is projected for the current year, influenced by tariffs, tariff-related uncertainty, fiscal adjustments, and a slowdown in the U.S. economy. Downside risks are prevalent, and the scope for counter-cyclical policy measures is limited.
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