The economy continues to show signs of strength yet a certain number of indicators in December 2017 pointed to slower momentum this year. On activity, USD-denominated exports growth moderated to +10.9% y/y (from +12.3% in November). And imports growth decelerated sharply to +4.5% y/y (from +17.7%). On financing, outstanding loan growth slowed to 12.7% y/y (from +13.3% in November). On prices, producer prices rose in December but at a slower pace (+4.9% y/y, down from +5.8%). Business confidence remains in check with both the official and the private PMI suggesting expansion in the near term for the services sector. On the manufacturing side, the official factory gauge decreased to 51.6 points (from 51.8 in November) on the back of slower growth in output and new orders. Looking ahead, economic growth is set to lose some steam in 2018 (we forecast +6.4%). Policy moves to improve growth quality may accelerate in the form of tighter credit conditions, stronger progress on SOEs reforms and further cuts in overcapacity. On the upside we expect accommodating fiscal policy to bolster domestic demand and a continued rise in per capita disposable income as well as strong corporate profits supporting economic growth.
