Mexico Outlook Revised To Negative On Weakening Fiscal Flexibility; 'BBB' Foreign Currency Rating Affirmed

• On May 12, 2026, S&P revised Mexico's long-term sovereign credit rating outlook to "negative" from "stable," signaling a risk of very slow fiscal consolidation due to weak economic growth, which could lead to a faster-than-expected buildup in government debt and a higher interest burden. The "BBB" long-term foreign currency and "BBB+" long-term local currency sovereign credit ratings were affirmed.
• Mexico's low per capita economic growth remains a primary rating constraint, with the report projecting GDP growth to be only 1% in 2026, a slowdown from 3.1% in 2023 and 1.1% in 2024. This soft economic activity, combined with rigid spending, erodes fiscal flexibility and pushes up debt.
• S&P expects Mexico's general government deficit to reach 4.8% of GDP in 2026, attributed to a weak economy and government efforts to stabilize fuel prices through forgone taxes. The report forecasts a very gradual fiscal consolidation, with the deficit averaging 4.2% of GDP for the forecast period.
• Net general government debt is forecast to rise to approximately 54% of GDP by 2029, a significant increase from 49% in 2025. Interest payments are expected to average over 15% of government revenues during the forecast period.
• Continued and substantial fiscal support for the state-owned energy producer Petroleos Mexicanos (Pemex) and the power utility Comisión Federal de Electricidad (CFE) is expected to further strain public finances and aggravate fiscal rigidities.
• The report assumes that all of Pemex's debt amortizations will be financed by central government transfers and views the likelihood of extraordinary government support for both entities as "almost certain."
• While trade ties with the United States are expected to remain strong, uncertainty surrounding the renegotiation of the United States-Mexico-Canada Agreement (USMCA) weakens investment sentiment.

(Source: S&P Global Credit Ratings)