Official data released at the end of March show that the downswing intensified at the end of 2017 – real GDP contracted by -1.2% y/y in Q4 – and confirmed an earlier flash estimate that full-year GDP declined by -0.7% last year. Details indicate that the November 2016 OPEC agreement to cut oil output was the main trigger for the recession in 2017. On the expenditure side, it caused a sharp drop in capital formation, with fixed investment falling by -7% and inventories subtracting -0.3pp from 2017 growth, and declining external trade activity. Real exports fell by -3.2% last year and imports by -4.5%, so that net exports made a small positive contribution of +0.2pp to growth. Meanwhile, consumer and public spending both grew modestly by +2% and +0.8% last year, respectively. Note, however, that Q4 real GDP increased by +0.4% in q/q seasonally-adjusted terms which is pointing to a tentative recovery this year. Moreover, the impact of the oil output cut has now waned and the government has announced a number of public sector bonuses and higher public infrastructure spending to come. Overall, we forecast real GDP growth of +1.7% in 2018.
