(Adds Pemex ratings improvement)
MEXICO CITY, Aug 3 (Reuters) - Ratings agency Fitch Ratings on Thursday revised its outlook for Mexico's credit to stable from negative, the second such upward revision for the sovereign in the last month by credit ratings agencies as the worst fears about the country's economy subside.
"Fitch believes the risk of a disruptive scenario that could undermine Mexico's export competitiveness and hurt potential growth or jeopardize overseas remittance flows are diminishing," the ratings agency said in a statement.
Fitch underscored that the improved outlook reflects reduced downside risks to Mexico's growth forecast and expected stabilization of the public debt burden, as well as the United States' "moderating" stance toward renegotiating the North American Free Trade Agreement (NAFTA).
"The economy has shown resilience to lower oil prices and risks from U.S. protectionist policies, and the authorities have demonstrated capacity to navigate these challenges," Fitch added.
Mexico's peso briefly appreciated against the U.S. dollar after Fitch's revision to 17.84, but then almost immediately reversed those gains, suggesting the rosier outlook was already priced in by the market.
The peso sank to a record low in January on fears that U.S. President Donald Trump could rip up NAFTA, which underpins nearly a $1 trillion in annual trade between the United States, Mexico and Canada.
But the peso rallied back as Trump's administration has taken a more conciliatory tone and moved to renegotiate the 23-year-old trade accord.
Mexico's Economy Minister Ildefonso Guajardo said on Thursday that under a best-case scenario, a newly negotiated NAFTA would not be implemented before the end of 2018 or early 2019.
Fitch also improved the ratings of state oil company Pemex, the company said on Thursday, lifting it from negative to stable. Petróleos Mexicanos, better known as Pemex, attributed the ratings improvement to its efforts to cut costs, focus on more profitable projects and its private sector tie-ups resulting from the country's energy sector opening.
Standard & Poor's last month revised Mexico's sovereign credit outlook up to "stable" from "negative" and commended the government's efforts to rein in a surge in debt. (Reporting by Anthony Esposito, editing by G Crosse)