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Although the capacity to pay, as expressed by the debt-to-GDP ratios, does not seem unsustainable, the government should promote fiscal consolidation in order to prevent the debt from continuing to increase after 2022, ensuring sustainability in the medium term and the preservation of the Investor Grade.
Emerging assets have successfully managed to overcome a turbulent year, marked by increased protectionism and fears of a sharp slowdown in the world economy.
Probability of recession in 12 months at one-year lows (30%). Financial conditions remain solid after Fed “mid-cycle” adjustment. Strong household finances supporting consumption.
December 5, 2019
Mexico | Financial system risks stemming from excessive credit growth remain subdued
The Financial Stability Report highlights that the pace of private financing to households and firms has diminished. There are upward risks for households and firm’s non-performing loans as the economy and employment have impaired recently.
The publication of world debt data, compiled by the Institute of International Finance (IIF) from various sources, estimates that debt increased again in the second quarter of 2019, reaching 320% of GDP worldwide.
Models suggest 70% probability of recession within 24 months. Increased weakness in global growth. Policy uncertainty whipsawing with trade tensions. At times, key financial markets showing signs of panic-like conditions.
Models suggest more than 70% probability of recession within the next 24 months. Shadow banking, business debt and risk appetite represent major red flags. Dovish Fed response has potential to negate downside risks in short-term.
Models suggest more than 50% probability of recession within the next 24 months. Global, housing and business debt represent major red flags. Fed’s strong dovish bias a response to risks. Markets digesting the balance between weaker outlook vs. lower expected interest rates. Economic fundamentals for households and financia…