Real GDP growth slowed down markedly to +4.5% y/y in Q2 from +5.4% y/y in Q1, reflecting supply disruptions in the mining sector (-2.2% y/y in Q2) as well as supply constraints and adverse weather conditions in agriculture
(-2.5% y/y). Domestic demand was strong, led by the private sector. Both private consumption and investment accelerated, to +8% y/y (from +6.9% in Q1) and +6.1% (+0.5% in Q1) respectively. Public expenditures were weak (-1.4% y/y). Net exports contributed less to growth (+0.1pp) than in the previous quarter (+4pp) due to weaker export and higher import expansion. Looking ahead, external risks stem from elevated trade-related tensions between China and the U.S. and tighter U.S. monetary policy. At home, a tight fiscal stance may act as a drag on growth. Against this background, we expect monetary tightening to pause for the remainder of the year with the key rate at 3.25% and real GDP to grow by +5% in 2018 as a whole (after +5.9% in 2017).
