Fitch placed Mexico's rating at BBB- in April 2020, and in July of this year, it confirmed a stable outlook for the sovereign’s rating. Fitch is just one notch away from stripping the country of its investment grade status. Fitch's analyst for Mexico, Carlos Morales, has indicated that he doesn't believe Mexico will be downgraded in the next year or two. This indicates that the threshold for Fitch to downgrade Mexico to junk is very high.
Morales' GDP growth forecast for Mexico in 2025 is 1.4%, which is broadly in line with market expectations. In our view, for Fitch to consider downgrading Mexico, the fiscal outlook announced by the Ministry of Finance on November 15 would have to disappoint massively and growth would have to collapse. We believe that Fitch doesn't really want to downgrade Mexico to junk unless reality forces them to do so. We think Fitch could change the outlook to negative in 2025 if Mexico falls into a recession and the fiscal deficit remains high. In sum, after listening to Morales, we think a downgrade in 2025 is unlikely. - Natixis
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