Mar 1, 2019

GDP increased by 3.5% YoY in January 2019

Quick Update

  • According to the initial estimates of Geostat, real GDP growth slowed to 3.5% YoY in January 2019 following the 5.6% increase in December 2019. Growth was observed in trade, hotels and restaurants, real estate and financial intermediation, while manufacturing and construction contributed negatively.
  • January slowdown partly reflects lower exports of goods growth, especially in categories with higher domestic value added (see note on external trade) having the largest negative impact on manufacturing sector. At the same time, decline in construction sector mirrored lower activity of transport infrastructure construction (including the completion of BP’s SCPX project) as well as the decline of residential and commercial real estate construction. The new regulations on construction permits and bank lending could have already affected the sector.
  • As for consumption and investments, weak domestic demand is likely to have persisted also in January at least to some extent. In particular, retail lending growth has slowed and NBG bought record high level of reserves at around 8% of monthly GDP – an indication of strong inflows and/or weak domestic demand.  More importantly, imports adjusted for petroleum products increased only by 1.5% YoY in USD terms. Also, tourism and remittance inflows have been weaker (see notes on tourism and remittances). At the same time, important to mention that domestic demand might not have been as weak as reflected in data expressed in USD due to the appreciation of USD against EUR and GEL and higher growth in trade in goods, remittances and tourism expressed in EUR and GEL. As for the fiscal, the surplus even adjusted for seasonality was sizeable in January. However, sharp increase of deficit by the end of December 2018, which is going to have largest impact on growth in coming month, could have had some positive impact on January domestic demand as well (see note on fiscal).