Moody’s Downgrades Mexico Credit Rating Amid Rising Debt and Fiscal Pressure

Moody’s Ratings downgraded Mexico’s long-term local and foreign-currency issuer ratings from Baa2 to Baa3 on Tuesday, while revising the outlook to stable from negative. The agency also cut the ratings for Mexico’s senior unsecured shelf and medium-term note (MTN) programs to (P)Baa3 from (P)Baa2, citing growing fiscal challenges and weak economic growth prospects.

The downgrade reflects continued deterioration in Mexico’s fiscal strength, driven by persistent budget deficits, rising public debt and ongoing financial support for state-owned oil company Petroleos Mexicanos (PEMEX). Moody’s said rigid government spending, limited tax revenue and weak economic expansion have reduced the government’s ability to stabilize debt levels.

Mexico’s fiscal deficit stayed close to 5% of GDP in 2025, only slightly below the 5.3% recorded in 2024. As a result, government gross debt climbed to 49.3% of GDP in 2025, compared with 46% in 2024 and 39.8% in 2023. Moody’s expects deficits to remain above 4% of GDP through 2027, pushing the debt burden toward 55% of GDP by 2028.

The rating agency highlighted the financial strain caused by continued support for PEMEX. The Mexican government provided around $35 billion, equivalent to 1.9% of GDP, to the energy company in 2025 and plans to allocate another $14 billion in 2026. Moody’s warned that further assistance will likely be necessary unless PEMEX significantly improves its operations.

Moody’s also lowered Mexico’s GDP growth forecast to below 1% in 2026 and 1.3% in 2027. The agency noted that repeated breaches of fiscal targets since 2023 have weakened confidence in the country’s fiscal policy framework.

Despite the downgrade, Moody’s assigned a stable outlook, pointing to Mexico’s macroeconomic stability, resilient institutions and expectations for gradual economic recovery toward 2% long-term growth.