Moody's credit rating agency has changed the outlook for Mexico's debt rating to negative from stable, citing low oil prices and slow economic growth. But the agency maintained Mexico's A3 rating on senior debt, indicating very low risk.

The agency said subdued economic growth and possible government financial support for Pemex pose challenges for meeting fiscal deficit targets. It noted that Mexico federal government debt rose to 34.4 percent of GDP in 2015 from 27.9 percent in 2011. But that could rise to over 40 percent of GDP if Pemex is forced to turn to the government for financing.

Mexican govt aims to cut spending by 32 billion pesos this year and intends to maintain budget austerity in 2017. “If authorities deliver on the spending cuts and carry out additional measures, a downgrade will likely be avoided. But if authorities fail to deliver, the chances of a downgrade will increase.” said Nomura strategist Benito Berber

Moody’s sees Mexico’s economy growing 2.5% this year and next, which it said could put pressure on the government as it seeks to lower its annual deficits. Moody’s expects federal government debt-to-GDP to gradually rise from last year’s 34% and stabilize around 37% in 2018.