Mexican financial council warns of ‘prolonged’ economic weakness

MEXICO CITY (Reuters) – Mexico’s economy faces the risk of “prolonged and more accentuated weakness” on softer consumer buying and investment, due in large part to the pandemic’s economic drag amid a weaker than expected global recovery.

The warning for Latin America’s second-biggest economy was detailed in a report from the country’s financial stability council issued late Thursday.

The council, which includes Mexico’s finance minister, central bank governor and head of the banking commission, also cited “potential impacts” depending on how credit rating agencies assess state-owned Pemex, the world’s most-indebted oil company, which lost its investment grade rating in 2020.

The credit rating of the ailing Mexican oil giant could still sink further.

The Mexican economy shrank in the third quarter by 0.4%, more than expected, in its first quarterly contraction since it began clawing back lost ground after the coronavirus pandemic struck last year.

Annualized gross domestic product growth for the quarter, however, stood at 4.5%.

(Reporting by Adriana Barrera; Editing by David Alire Garcia and Richard Pullin)