The unpredictable process of policymaking in Mexico is undermining investor confidence and the medium-term economic outlook, Moody’s said on Monday, forecasting growth of 1.2% in 2019, compared to 2% in 2018.
“As a result, public revenues may be lower than the government anticipates, which would require spending cuts to maintain fiscal discipline as President Andrés Manuel López Obrador has promised,” said Alejandro Olivo, associate manager of Moody’s in a bulletin.
In a new report, the rating firm predicted that the state-owned company Petróleos Mexicanos (Pemex) will require additional financial support from the Mexican government to finance its planned investments.
“Pemex will need even more government support if it is to achieve its ambitious production goals, and it may also need help for its large debt maturities,” he said.
According to the firm, “this uncertainty has added to market concerns about the predictability of policies and undermined the confidence of investors in Pemex.”
“While the appetite for investing in infrastructure projects in Mexico exists, the unpredictable environment that followed the cancellation of the New Mexico City Airport project has also undermined the confidence of the market and investors in the sector,” he said.
In addition, he added, “the expected fiscal consolidation plans of the federal government could lead to a decrease in public investment in infrastructure in the near future.”
Despite a moderation in economic growth, Moody’s expects Mexican banks to maintain solid financial fundamentals.
But the decline in economic activity will put pressure on several segments of the insurance area and it is expected that its negative effect will reduce the recent growth of industry premiums.
According to the report, the directors of the pension and investment funds will maintain their conservative investment strategy, with high concentrations of short-term and highly liquid securities.
The first week of June, the rating agency changed the outlook from stable to negative for seven Mexican banks, including BBVA Bancomer, Santander and Banorte.
These shares are the result of the change in the outlook from negative to stable from the bond rating of the Government of Mexico of A3, announced on June 5, 2019, “the company said in a bulletin.
Also, Moody’s changed the outlook for sovereign debt for Mexico from stable to negative, estimating that the country will have a “difficult year” in 2019, and did the same for Pemex. (EFE) .-