May 12 (Reuters) - Credit ratings agency S&P on Tuesday revised Mexico's outlook to "negative" from "stable", citing the risk of very slow fiscal consolidation largely due to weak economic growth that could lead to a faster-than-expected buildup in government debt and a higher interest burden.
The agency said Mexico's low per capita growth remains a key ratings constraint, while soft economic activity, rigid spending and weak financial position of the country's largest public-sector companies are
eroding fiscal flexibility and pushing up debt.
S&P said continued fiscal support for Mexican state energy producer Petroleos Mexicanos (Pemex) and power utility Comision Federal de Electricidad (CFE) is expected to further strain public finances.
While trade ties with the United States are likely to remain strong, uncertainty about the renegotiation of the free trade agreement weakens investment sentiment, the agency added.
S&P expects Mexico's general government deficit to reach 4.8% of GDP in 2026, citing a weak economy and government's efforts to stabilize fuel prices through forgone taxes. It sees only gradual fiscal consolidation as growth recovers and energy shocks fade.
Net general government debt is forecast to rise to about 54% of GDP by 2029 from 49% in 2025, S&P said.
The agency maintained Mexico's "BBB" long-term foreign currency and "BBB+" long-term local currency sovereign credit ratings.
(Reporting by Aatrayee Chatterjee in Bengaluru; Editing by Shailesh Kuber)
