Net exports and consumption were major drivers of nominal GDP growth in Q1 2019, while the investment activity declined.
Despite its positive contribution, private consumption growth in nominal terms (+4.6%) weakened compared to 2018 (+7.3%), likely reflecting tighter regulations on non-mortgage lending. At the same time, public consumption expenditures increased strongly by 13.4%, compensating for the slower household consumption growth (see TBC Economic Review, insight #6).
The investment was weak having declined by 5.2% in Q1 2019, mostly reflecting the one off impact of completion of the BP’s pipeline construction project. In addition, mortgage lending and construction sector regulations affected the growth of construction sector negatively (see note on GDP growth). Over the trailing 4 quarters as of Q1 2019 contribution of investment still remains positive and its share in GDP stays at solid 32.4%.
Lower investment activity also explains a notable improvement in the CA balance especially in Q1 2019 as well as over the trailing four quarters as of Q1 2019 (see note on CA deficit improvement) as lower savings-investment gap was primarily due to a drop in investments. Savings also increased, albeit more moderately.
Source - TBC Research
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