GDP growth records best reading since Q4 2021 in Q1

GDP growth accelerated to 1.9% on a seasonally adjusted quarter-on-quarter basis in the first quarter, up from 0.1% in the fourth quarter of last year and broadly in line with market expectations. Q1's reading marked an over two-year high. On an annual basis, economic growth gathered traction, accelerating to 2.3% in Q1 from the previous quarter's 0.4% growth. In Q1, the economy benefited from lower inflation and interest rates, and higher copper output thanks to a new processing plant and better ore grades.

The quarter-on-quarter upturn reflected broad-based improvements in private consumption, public spending, fixed investment and exports. Household spending picked up to 1.1% seasonally-adjusted quarter-on-quarter in the first quarter, which marked the best reading since Q4 2021 (Q4 2023: +0.4% s.a. qoq). Government consumption rose 4.7% in the first quarter, up from the fourth quarter's flat reading. Fixed investment dropped at a softer pace of 0.1% in Q1, following the 3.4% decrease recorded in the prior quarter. Exports of goods and services increased 1.9% on a seasonally adjusted quarterly basis in the first quarter, which contrasted the fourth quarter's 0.8% contraction. In addition, imports of goods and services bounced back, growing 2.1% in Q1 (Q4 2023: -2.2% s.a. qoq).

Our Consensus is for quarter-on-quarter GDP growth to slow in Q2 from Q1’s above-trend pace, though underlying momentum will continue to be supported by loosening financial conditions.

EIU analysts commented: “Risks to our GDP growth forecasts are tilted to the upside, as copper prices have risen sharply in recent weeks. If the rally lasts and represents a new price level for the metal, it may spur greater than expected investment in the mining sector aimed at increasing the productivity of existing mines quickly, boosting GDP growth this year and next.”

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