LatinNews Daily - 17 July 2020

*US investment bank, Bank of America (BofA), has released a new report warning that Mexico could lose its investment grade rating next year. The BofA report notes that Mexico’s structural fiscal deficit will only be exacerbated by the sharp contraction in GDP projected this year due to the coronavirus (Covid-19) pandemic. It adds that the limited economic stimulus measures adopted by the Mexican government mean that a swift economic recovery is unlikely. This fall in economic activity will lead to significantly lower levels of government revenue, which will in turn drive up public debt levels from the current 45% of GDP to 60% of GDP by the end of year. This leads BofA to conclude that “We believe the fiscal deterioration along with a very weak economic recovery could lead rating agencies to downgrade Mexico to High Yield [‘junk’] in 2021”. 

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