The economy continues to show signs of strength. Industrial production rose by +23.6% y/y in February (after +17.2% y/y in January). Business sentiment is still well oriented. The manufacturing PMI rose to 51.5 in March (from 50.8 in February) driven by a rise in output and new orders. Consumer inflation accelerated to +4.3% y/y in March (from +3.8% in February), above the central bank inflation target of +2% to +4%. Going forward, there is room for continued optimism. The economy benefits from a strong growth in domestic demand fueled by a solid growth in private consumption, investment and a supportive fiscal policy. The government intends to increase infrastructure spending as part of the “Build, Build, Build” program to 7.2% GDP in 2022 (from 4.5% in 2016). Against this background, we expect inflation to increase to +4% in 2018. We pencil in an interest rate hike of 25bps to 3.25% in 2018.
