Mexico’s Debt Will Increase: IMF

Though President López Obrador says that the country will not incur in more debt, IMF says the country’s debt will increase by around 8 points of the GDP ending 2020 with a deficit accounting to 61.4 percent of its GDP. Moreover, the government deficit will increase from 2.3 to 4.2 percent.

In the scenario prospected by IMF, the debt increase would come as the result of the COVID-19 pandemic, without any additional injections from the government to palliate the economic crisis. According to Carlos Ramírez, from Integralia Consultores, the increase in debt would be the result of the 6.6 percent fall of the GDP anticipated by IMF and the depreciation experienced by the exchange rate.

The negative perspective of Mexico’s financial future has also taken a toll on the country’s investment perspectives. Yesterday, Fitch Ratings reduced Mexico’s investment rate from BBB to BBB-, which puts Mexico just one step above the investment grade. “The economic shock that the pandemic represents will conduct to a severe recession in Mexico in 2020. Recovery in the second half of 2020 could be halted by the same factors that have hindered the recent economic development,” said the agency.

PEMEX also remains a risk factor for the country. According to Fitch Ratings, the debt of the national company totals US$105 billion, accounting to 9 percent of the GDP, and represents a risk specially considering the fall in oil prices.

However, not everything is grim on Mexico’s future perspective. Fitch Ratings also expects that the enforcement of USMCA in mid-2020 will reduce the uncertainty that surrounds the country.