Recently released data by the General Authority for Statistics (GAS) show that real GDP grew by +2.2% in 2018 as a whole, following the -0.7% contraction in 2017. The rebound was driven by strong export expansion of +7.6% (-3.1% in 2017), thanks to much increased oil output. Imports rose more modestly by +2.6% (+0.4% in 2017) so that net exports contributed +2.4pp to 2018 growth (-1.1% in 2017). Domestic demand was weak last year, with consumer spending easing to +1.8% (from +3.2%), in part due to the 5% VAT introduction at the start of 2018; public spending declining by -1.8%, owing to fiscal consolidation measures, and investment being flat. For 2019 we expect another shift in the breakdown of GDP growth. As OPEC and allies agreed on new oil production cuts at the end of 2018 which shall last until at least mid-2019, we forecast overall exports to shrink this year. On the other hand, domestic demand should see a broad-based recovery, thanks to a record expansionary budget for 2019, with spending to be boosted by +7.3% vs. 2018, reflecting a prioritization of growth over deficit reduction. Overall, we forecast full-year GDP growth of +1.7% in 2019.
