Moody’s upgrades the credit outlook for the Mexican banking system.

Moody’s upgraded the credit outlook for the Mexican banking system from “stable” to “positive”.

Moody’s upgraded the credit outlook for the Mexican banking system from “stable” to “positive” and estimated that the banks’ business volume in Mexico will rise with the sustained growth of nearshoring.

Moody’s announced on Thursday that it has upgraded the credit outlook for the Mexican banking system from “stable” to “positive.” The agency estimated that the banks’ business volume in Mexico will increase due to sustained growth in nearshoring and consumer confidence, which will stimulate domestic demand.

Furthermore, the credit rating agency believes that the sector’s profitability, rated “Baa2”, will grow due to loan expansion and reduced financing costs, offsetting investments in branches and digitization, as well as increased provisioning needs.

“Moody’s stated in a press release, ‘Our investment outlook associated with nearshoring (relocation of investments closer to the United States) is favorable, which is likely to support long-term growth in commercial loans.’

The rating agency added that, although it anticipates Mexico’s GDP growth to decelerate to 2.2% in 2024 and 2.0% in 2025, from 3.2% in 2023, private consumption remains robust, at 5.6% year-on-year as of December 2023, benefiting from increased business volume in the country’s banking sector.”

Nearshoring holds significant importance for Mexico amidst the ongoing trade dispute between the United States and China.

Mexico’s proximity to the US, coupled with its network of free trade agreements, makes it an attractive destination for companies seeking to relocate their manufacturing operations closer to their primary markets.

The skilled labor force, established manufacturing industry, and cost competitiveness further enhance Mexico’s appeal for nearshoring initiatives.

As companies seek to diversify their supply chains and mitigate risks associated with geopolitical tensions, Mexico emerges as a strategic choice due to reduced transportation costs, shorter lead times, and preferential access to the North American market through agreements like the USMCA.