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The Government submitted, the fiscal reform bill that includes social measures, mostly transitory, to mitigate the effects of the pandemic on the most vulnerable and raises tax collection by 15.2 trillion pesos permanently, of which 70% from corporate taxes and the rest from anti-evasion and austerity measures.
Exports of goods overcame the weak start of the year and remained sustained, surpassing pre-pandemic levels in May. A progressive recovery in the tourism sector is expected, as foreign tourism is partially offset by national.
Based on historical evidence, the Economic Watch assesses the plausibility of meeting Net-zero and NDC emission pathways (with GDP growth conditioned or not to BBVA baseline) and suggests that if unprecedented shocks are not induced (e.g. through carbon price policies), climate targets will not be reached.
In 2021 and 2022, economic growth will be driven by the strong dynamism of internal demand and the global economy. Transitory factors will put pressure on inflation and the risk that it will take time to return, with higher activity, will lead the Central Bank to begin a tightening cycle of rates in late 2021.
We upwardly revised the 2021 GDP growth forecast to 6.3% from 4.7%. Banxico will continue increasing the reference rate for the rest of the year unless inflation drops more-than-expected.
On June 24, the Board of Governors of Banco de México decided, with three votes in favor and two against, to increase the monetary policy rate by 25 basis points
The Central Bank of Turkey (CBRT) maintained the policy rate (one-week repo) at 19% in line with the expectations. Given the rising upside risks on inflation outlook and potentially increasing global yields, we expect the CBRT to start an easing cycle only very gradually in October and end the year with 17.5% policy rate.
Industrial Production grew by 41% yoy in calendar adjusted terms in May, implying 39% yoy growth in unadjusted series, boosted by base effects. Given strong momentum so far and upward revisions in global growth we revise our 2021 GDP growth forecast on the upside to 8% and downgrade our 2022 GDP growth forecast to 4%.