Preliminary estimates show that Q1 real GDP rose by +0.5% q/q after +0.4% q/q in Q4 2018. Yet this acceleration was an illusion as it resulted from an unhealthy positive contribution of net exports (+0.4pp). The latter was due to a stronger contraction of imports (-4.6 % q/q) than exports (-2.4% q/q). Domestic demand was weak. Private consumption decreased by -0.1% q/q. Private non-residential investment dropped by -0.3% q/q. Going forward, domestic demand is set to gain some traction, helped by a rise in both private consumption and investment. In particular, we see a frontloading of household spending in Q2 and Q3 ahead of the planned sales tax hike (from 8% to 10%) in October 2019, before a contraction in Q4 after its implementation. Investment will pick up speed gradually, helped by favorable monetary conditions, rising expenditure for automation due to labor shortages and construction projects for the 2020 Olympics. We expect full-year growth of +0.8% in 2019 (after +0.7% in 2018).
