Economics: More reluctance to take on new debt
Financing to the non financial private sector has been waning since mid 2018 as businesses and households hold back from seeking credit as they take stock of rising interest rates, sources of uncertainty and the slowing of the economy. The latest central bank data shows declining demand for, or access to, credit in general. While local currency financing to the private sector has tended to mirror the downward trajectory of financing overall, foreign currency financing has experienced a much more dramatic real term decline since 4Q17.
Since mid 2016 there has also been a slowing of commercial bank local currency financing both in the case of private company funding and the granting of consumer credit to households. Following a bit of a recovery between 3Q17 and 2Q18, that deceleration has grown more pronounced. But reluctance on the part of creditors is not the only problem.
Banxico’s most recent quarterly survey shows private businesses more reticent to seek funding sources from abroad, which should hardly come as a surprise given the extent to which the peso has trended weaker against major international currencies, foreign currency debt has grown more scarce and is available only at higher interest rates, and financial markets display heightened volatility. And in the last quarter of 2018 there was a light increase in the percentage of companies reporting that their demand for credit was being constrained by the extent to which higher borrowing rates and a weakening of their companies’ sales might complicate their ability to service the debts they are already trying to pay down.
But surveys also reveal a much broader range of factors that are fueling a growing sense of caution on the part of businesses to take on additional debt even from lenders and other financing sources inside Mexico.
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