July 22, 2020 / 9:22 PM / 21 days ago

Moody's sees slow consumer recovery in Mexico

MEXICO CITY, July 22 (Reuters) - ``Consumer spending in Mexico is unlikely to pick up before year’s end as the Mexico City area, the country’s core consumer market, continues to suffer a high tally of coronavirus infections and deaths, Moody’s Investors Service said on Wednesday.

Mexico dipped into a light recession last year, and analysts expect the economy this year to shrink as much as 10%.

“The high concentration of cases and fatalities in Mexico City makes a significant recovery in consumption less likely given the size of the district’s consumer market,” Moody’s said, noting that the capital has reported 70 fatalities per 100,000 people.

Even so, low testing has made the pandemic’s impact on consumption difficult to assess, Moody’s said.

Private spending has already “collapsed” in the first half of the year due to lockdown measures, it added, with low-income workers especially hit by job losses and wage cuts.

Banks are expected to only provide limited relief. “Mexico’s small consumer credit market will likely remain highly restrictive as banks become even more cautious during the ongoing recession,” the ratings agency said.

Prominent investors already fear Latin America’s second-largest economy could follow Mexican state oil company Petroleos Mexicanos in seeing its credit rating relegated to “junk” territory as the pandemic continues to take a toll. [nL1N2DF04Y (Reporting by Mexico City Newsroom Editing by Alistair Bell)

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