GDP growth moderated to 5.9% year on year in the third quarter, from 7.1% in the second quarter. Q3’s reading marked the worst since Q1 2021.
The downturn was broad-based, with private consumption, public spending, fixed investment and exports all weakening. Household spending growth remained robust but moderated to 10.2% in Q3 (Q2: +10.9% yoy). Public spending dropped at the sharpest pace since Q1 2022, contracting 0.1% (Q2: +5.0% yoy). Fixed investment growth slid to 14.0% in Q3, from 19.1% in the prior quarter, with investment mainly propelled by higher spending on machinery and equipment.
On the external front, exports of goods and services contracted 4.6% in Q3, marking the worst reading since Q1 2021 (Q2: +9.2% yoy), hit by a worsening global economic environment. Meanwhile, imports of goods and services growth slowed to 21.0% in Q3 (Q2: +23.1% yoy).
On a seasonally adjusted quarter-on-quarter basis, economic growth accelerated to 1.7% in Q3, from the previous quarter’s 1.0% expansion. Q3’s reading marked the strongest expansion since Q4 2021.
Activity is expected to weaken further in Q4, as downbeat consumer sentiment, coupled with a further spike in inflation, hits private consumption. Moreover, political uncertainty will restrain investment. As for next year, growth will grind to a near-halt. Domestic demand will be buffeted by sky-high inflation and interest rates, depleted savings and an uncertain business environment ahead of the general elections in October 2023. On top of this, a weaker global economic environment will cap export growth. Elevated debt repayment risks cloud the outlook.
FocusEconomics analysts see the economy expanding 2.6% in 2022, up 0.2 percentage points from the previous month’s forecast. In 2023, analysts see growth of 1.9%.