Economy records modest expansion in Q1

Economic activity increased 0.2% on a seasonally adjusted quarter-on-quarter basis in the first quarter, above the 0.1% contraction logged in Q4 and marking the best result since Q2 2023. However, Q1’s data looks weak given the rate of population growth: GDP per capita actually fell in Q1 for the sixth consecutive quarter.

Strong private spending outweighed declines in government spending, investment and external trade. That said, the statistical office cautioned that private consumption and exports data could be unreliable, due to changes to seasonal spending patterns brought on by the pandemic. Private consumption increased 1.6% in the first quarter, which was above the fourth quarter's 0.6% expansion. Public spending fell at a softer rate of 0.3% in Q1 (Q4 2023: -0.5% s.a. qoq). Meanwhile, fixed investment contracted at a steeper pace of 1.3% in Q1, following the 0.1% contraction logged in the prior quarter. Exports of goods and services fell 0.4% on a seasonally adjusted quarterly basis in the first quarter, which contrasted the fourth quarter's 3.2% expansion. Conversely, imports of goods and services rebounded, growing 6.1% in Q1 (Q4 2023: -2.8% s.a. qoq).

ANZ Bank analysts painted a gloomy picture of the economy: “In big picture terms, Q1’s GDP data shows economic momentum is anaemic, particularly from a domestic demand and per capita perspective. And while GDP growth is expected to start gradually recovering later this year, most households won’t feel it, given the domestic slowdown still has further to run and the labour market is loosening. Further, some forward indicators, such as reported past activity within our Business Outlook survey, suggest that Q2 GDP could be meaningfully softer than in Q1.” United Overseas Bank analysts took a similar view: “Despite the rebound, the economy is still contending with lingering effects of high inflation. We forecast GDP growth to remain sluggish at 0.7% in 2024. Positive factors include a recovery in housing market, surging net migration, and expansionary fiscal policy; while negative factors include tight monetary conditions, softer global demand, and heightened geopolitical tensions.”

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