Asia Regional Integration Center

Growth recovered to 7.5% in 2017, after near-zero growth in 2016, driven by an upsurge both in domestic and international demand. Inflation increased to 1.0% and the current account deficit widened incrementally to equal 2.5% of GDP. Growth is predicted to slow down to 4.0% in 2018 in 2019, as inflation remains below 3.0% and the current account deficit inches to 3.0% of GDP. Sustained fiscal consolidation is key to bring down high public debt.

Industry and services drive growth to 7.5% in 2017 from a negligible 0.2% in 2016. On the supply side, industry except for construction widened by 10.4%, twice the 4.8% rate in 2016, with improvements in most subsectors. Growth in services jumped to 10.4% from 4.0%, reflecting solid recovery in consumption. Buffeted by poor weather, agriculture declined by 4.0%. Construction grew by 3.1%, after 4 years of contraction, on higher private construction and government investment.

On the demand side, consumption and investment accelerated growth. Private consumption increased by an estimated 6.7%, following a 1.2% decline in 2016, on higher lending and remittances. Public consumption expanded by 6.3%, up from 4.1% in 2016, despite fiscal consolidation. Investment rose by 7.8%, reversing an 8.7% decline in 2016, with higher inventories and an estimated 4.0% increase in fixed capital formation, including higher government spending. The deficit in net exports widened as imports grew faster than exports.