Q1 real GDP growth accelerated to +5.2% y/y from +4.9% in Q4 2017. The demand-side breakdown reveals that Q1 growth was entirely driven by domestic demand while external trade activity slowed down markedly. Private consumption rose by +4.8% y/y and government consumption by +3.6% while fixed investment surged by +8.1%. Inven¬to¬ries added a significant +1.9pp to Q1 GDP growth. Meanwhile, export expansion dropped to +1.1% y/y in Q1 (from +8.2% in Q4) while imports eased to +3.5% (+8.9% in Q4) so that net exports subtracted -1.5pp from Q1 growth. The Manufacturing PMI fell to a 9-month low of 53.3 points in May but remained well above the 50-thresh¬old indicating growth. We expect investment activity to ease somewhat in the course of the year due to base effects and forecast full-year growth of +4.3% in 2018 (after +4.6% in 2017). Inflation came in at just 1.7% y/y in May and, as expected, the Monetary Policy Council today decided to keep its key policy interest rate at 1.5%.
