GDP: galloping investments, improving net export

According to the detailed data, GDP grew by a year-on-year 5.3 percent in the first quarter – in line with the preliminary number – while the quarter-on-quarter growth rate was 1.5 percent.

On the production side, construction value added expanded most spectacularly, by nearly 47 percent, but industrial growth also gained momentum and accelerated to 5.9 percent, the highest since the beginning of 2016. At the same time, agricultural value added contracted, due to the draught early in the year, and services growth was less buoyant than in the past two years, although it was still respectable (3.8 percent).

On the expenditure side, two surprising details are worth noting. First, while gross fixed capital formation expanded by a whopping 23 percent, total gross capital formation grew by less than 8 percent, due to the drastic downward pull of the changes in inventory. This resulted in an underwhelming growth of final domestic use by 4.3 percent, a pace well below what was seen in any quarter of the past two years, even though actual private consumption kept growing at a good pace (4.8 percent) in the first quarter.

Second, net export contributed positively to economic growth, unlike in the past eight quarters, by a significant 1.3 percent. While much of this has to do with a marked deceleration of services import, even merchandise trade trends were more favorable – according to the GDP statistics – than what could be surmised from the trade statistics numbers.

We expect both consumption and fixed investments grow at a good pace in the remaining quarters of the year, even if investment growth will markedly decelerate compared to the frantic pace seen in Q1. As a result, annual GDP growth may well reach 4.5 percent in 2019, although the future evolution of net export and the change in inventories is hard to predict.

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