February 6, 2017 / 7:28 PM / a year ago

CORRECTED-Moody's warns growing debt weighs on Mexico's rating

(Corrects to say Moody’s has Mexico on a negative perspective, not on watch for a credit downgrade)

MEXICO CITY, Feb 6 (Reuters) - Moody’s rating agency, which has put Mexico’s credit on a negative perspective, on Monday said the Mexican government’s debt rose more than expected last year and weak growth could further pressure policymakers this year.

“Worse-than-expected fiscal performance is credit negative for Mexico and weighs on its creditworthiness amid muted economic activity and rising tensions with the United States, its main trade partner, following the U.S. presidential election,” Moody’s Mexico analyst Jaime Reusche wrote in a research note.

The report cited data from the country’s Ministry of Finance, showing the federal government deficit increasing to 2.9 percent of GDP in 2016, up from 2.8 percent in 2015.

The ratings service had expected fiscal consolidation and a deficit reduction to 2.5 percent of GDP for 2016, it said.

The negative outlook comes as economists have slashed their outlooks for growth this year due to risks that policies implemented by U.S. President Donald Trump could crimp trade with Latin America’s second-largest economy and hit investments.

In 2016, Moody’s affirmed Mexico’s sovereign rating to A3 and changed its outlook from stable to negative. (Reporting by Natalie Schachar and Michael O‘Boyle; Editing by Lisa Shumaker)

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