2019.06.0523:53:00UTC+00Fitch Cuts Mexico's Sovereign Rating, Moody's Downgrade Outlook

Fitch downgraded Mexico's sovereign ratings citing risks to public finances from the state oil company Pemex amid weakness in macroeconomic outlook.

The sovereign ratings were lowered to 'BBB' from 'BBB+' and revised the outlook to 'Stable' from 'Negative'.

Moody's lowered Mexico's rating outlook to 'Negative' as government's policy-making is undermining investor sentiment and growth prospects of economy.

Fitch said the downgrade reflects a combination of the increased risk to the public finances from the state oil company, Pemex and the current weakness in the macroeconomic outlook in the face of trade tensions and fiscal constraints.

Mexico's growth is set to underperform further as downside risks are magnified by threats by U.S. President Trump to impose tariffs on Mexico from June 10. The five-year GDP growth averages 2.6 percent, which was below the 'BBB' median of 3.6 percent, the rating agency noted.

Further, Fitch viewed that meeting fiscal targets will become more difficult heading into 2020 and could result in tighter policy that creates a further headwind to growth.

Moody's said unpredictable policy-making along with the changes in the role of Pemex in the context of Mexico's energy policy, threaten to lift debt in years ahead, thereby eroding the fiscal strength of the nation.