In the first quarter of the year, the economy grew at the slowest pace since the third quarter of 2010, according to recently released national accounts data. Reflecting softer domestic demand, economic growth decelerated to 2.0% year-on-year in the first quarter, markedly below the prior quarter’s 2.9% increase.
Private consumption slowed from a 3.6% expansion in the fourth quarter of last year to a 3.0% increase in the first quarter of this year, likely influenced by a slowdown in remittances growth; in the first quarter, remittances increased 4.0% over the same period a year earlier (Q4: +11.2% year-on-year). Furthermore, the pace of growth in government consumption nearly halved, from 6.0% in Q4 to 3.1%. In the fourth quarter, government consumption had risen robustly due to the completion of public sector maintenance and repairs. Meanwhile, fixed investment growth was virtually unchanged from the previous quarter (Q1 2018: +1.8% yoy; Q4 2017: +1.9% yoy).
Both exports and imports contracted over the previous year in the first quarter. Exports of goods and services dropped 2.6%, contrasting the prior quarter’s 0.4% expansion. The contraction came on the back of lower foreign demand for nickel, sugar, oil, bananas, edible fats and oils, and rubber. Meanwhile, imports of goods and services fell 2.4%, markedly down from the previous quarter’s robust 1.6% increase. This was chiefly due to lower demand for consumption goods, fuels and lubricants, and construction materials.
Looking ahead, the economy is expected to accelerate slightly on the back of robust remittance inflows, which should spur private consumption, as well as a pick-up in government expenditure growth.
Banguat expects growth of between 3.0%–3.8% in 2018 and 3.1%–4.1% in 2019. FocusEconomics Consensus Forecast panelists expect growth of 3.2% in 2018, which is unchanged from last month’s forecast. For 2019, our panelists expect growth to clock in at 3.3%.