Belarus: Economy slows in Q2 after maintaining a steady stride in Q1
A preliminary estimate showed that the economy lost speed in the first half of the year, with GDP growing a meagre 0.9% on an annual basis in H1Growth in Q1 was revised up to 1.3% over the same quarter last year (previously reported: +1.1% year-on-year), thus the economy maintained the same pace of expansion as in Q4 2018 before losing momentum in the second quarter.
According to detailed first-quarter data, the domestic economy drove the overall first-quarter expansion. Fixed investment rebounded from a 3.3% contraction to a 4.2% expansion in Q1. On the other hand, private consumption growth decelerated amid a pick-up in price pressures, although remained robust (Q1: +5.3% yoy; Q4: +6.9% yoy), while government spending came in flat after falling 0.7% in Q4 2018. Meanwhile, on the external front, exports of goods and services fell 2.2%, marking a sharper contraction than the 0.5% drop in the previous quarter. Imports also fell in the first quarter, although the magnitude of the decline paled in comparison to exports (Q1: -0.1% yoy; Q4: +2.8% yoy).
Meanwhile, although a breakdown of drivers for Q2 is not yet available, a deteriorated external environment likely restrained growth. Russia’s gradual elimination of export duties on oil and raising of the mineral extraction tax has led to negative spillovers by ending preferentially cheap oil sales to Belarus. Industrial output fell in Q2, for the first time since Q3 2016, while exports contracted at more rapid rate than in the previous quarter. Moreover, transport activity was also down in the first half, while agricultural production languished in the doldrums in this period.