June 10, 2020 / 6:30 PM / a month ago

Mexico's economic outlook worsens amid pandemic, central bank says

FILE PHOTO: The logo of Mexico's Central Bank (Banco de Mexico) is seen at its building in downtown Mexico City, Mexico February 28, 2019. REUTERS/Daniel Becerril

MEXICO CITY (Reuters) - Mexico’s economic and financial outlook has worsened amid the coronavirus pandemic, and temporary measures to shore up the financial system will remain in place, the central bank said on Wednesday.

The five-member board of the Bank of Mexico, which is often referred to as Banxico, made the assessment on the outlook as it presented its latest financial stability report.

“The outlook for Mexico’s economy and financial system has deteriorated and become more uncertain,” the report said.

On April 8, Mexico loosened liquidity rules for banks to help them weather the turmoil caused by the pandemic, which the government says has not yet peaked.

Banxico said financial stress tests showed that capitalization levels among banks remain above the required minimum levels even in the most adverse scenarios facing Mexico, whose economy is expected to suffer a major contraction this year.

Financial conditions in Mexico tightened considerably in March and April, and late corporate payments are up slightly, especially among small and medium-sized firms, Banxico said.

All told, Mexico’s financial system is in a solid position, but there are risks that could intensify, the bank said.

Asked about a potential reform to Mexico’s pension system, Banxico Governor Alejandro Diaz de Leon said he lacked the specifics on the proposed changes by lawmakers but underscored the importance of the system.

“The pension system has been a fundamental element in the development of financial markets in our country and the efficient channeling of resources between agents that are saving and those that require financing,” said Diaz de Leon.

Reporting by Anthony Esposito and Abraham Gonzalez; Writing by Dave Graham; Editing by Daina Beth Solomon and Lisa Shumaker

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