Real GDP growth moderated to +5.6% y/y in Q1 2019 (from +6.3% in Q4 2018). Investment and government spending slowed while net trade contributed negatively. Private consumption showed some improvement (+6.3% y/y in Q1 after +5.3% in Q4). Inflation has decreased considerably (+3% y/y in April, down from +6.7% in October 2018) and is now within the Central Bank’s target range (3% ± 1pp for 2019-2020). The economic outlook is relatively fragile considering rising tensions between China and the U.S., lower global trade growth and weaker private sector sentiment. Business sentiment in the manufacturing sector is on a downward trend as reflected by the manufacturing PMI which declined over the past 6 months. Against this background, the Central Bank changed its policy stance and cut its key policy interest rate by -25bp to 4.5%. We expect one additional policy rate cut by the end of this year.
