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By KELIN DILLON

Big three credit rating agency Moody’s has revised its growth forecast for Mexico for the near future, lowering it to 1.5 percent for the current year and predicting a decline in dynamism for 2025 from 1.5 percent to 1.3 percent. 

Moody’s predicted slowdown in Mexico is expected to accompany similar trends in Latin America, particularly in Brazil and Argentina.

 “There will be a slowdown in Mexico, driven in part by high interest rates, and a rebound in smaller economies,” read Moody’s report. “Growth will also slow in Argentina due to austerity measures aimed at correcting long-standing fiscal and external imbalances. Likewise, Brazil will experience a slowdown as high interest rates weigh on economic activity. However, growth has been stronger than expected, and ongoing structural reforms could boost it further.”

In its recent economic outlook update, the rating agency – which downgraded Mexico’s credit rating from stable to negative just last week – noted that a gradual stabilization in global and local macroeconomic conditions could support the credit quality of governments, companies, and financial institutions in emerging markets by 2025.

However, a significant negative economic impact remains possible if U.S. President-elect Donald Trump implements the policies outlined during his campaign, which include substantial tariffs on Mexican products imported to the United States.

“A key risk to the emerging markets outlook is the possibility of policy changes in the U.S. During his campaign, President-elect Trump announced a number of policies that, if enacted, would cause significant disruption to both the U.S. and global economies. These include new tariffs and trade restrictions, as well as tax cuts that could lead to a deterioration in debt dynamics and a rise in inflation and interest rates. Much of the outcome will depend on the nature and implementation of the new U.S. policies,” continued the report. 

Moody’s also emphasized the various factors influencing growth in emerging markets like Mexico and across Latin America, including greater monetary easing, which may enhance domestic and external demand by reducing borrowing costs; declining raw material prices from their peak levels; and shifts in government fiscal policies alongside changing trade flows, like diversification from reliance on China.

“Another important factor, and now more uncertain, is the United States – its economic growth, interest rates, and potential trade and foreign policy changes under a second Trump administration. Our base projections incorporate some uncertainty regarding U.S. domestic and international policies,” added the rating agency.

 Moody’s report stated that while governments like Mexico may benefit from stabilizing GDP growth and easing financial conditions, debt levels remain high. The agency subsequently forecasted a slight decrease in the average debt-to-GDP ratio for emerging market governments next year, as lower interest rates and increased revenues are expected to reduce budget deficits.  

“However, mandatory spending, including on debt obligations, limits fiscal improvements. Debt affordability indicators will deteriorate as interest rates remain high, even if they decline. Default rates will move toward historical averages, having declined steadily from high levels in 2023,” Moody’s concluded.