Finally, an end to the recession

The NBS has released the national accounts for Q2 2017 to show an end to the recession with growth of 0.6% y/y (after a downward revision to -0.9% for the previous quarter). Our expectation was GDP growth of 1.6% y/y in Q2 on the basis of some recovery in both the oil and the non-oil economies. That for oil did materialize but the data for the non-oil economy gave mixed signals. These include a contraction in telecommunications and information, and growth in public administration, which were both firsts for at least two years.

The GDP data for Q1 was adjusted because oil output has been revised downwards from 1.83 mbpd to 1.69 mbpd. Just three months ago, the NBS lowered its output figures for the four quarters of 2016. Any criticism should be levelled not at the bureau but at the failure of the authorities to produce a single trusted data series for oil output. We do not think this is too demanding an ask.

Oil’s share of real GDP amounted to 8.9% in Q2 2017 and is now only the fifth largest in the economy: it is topped in descending order by agriculture, trade, information and communications, and manufacturing. Through its linkages across other sectors, however, the indirect oil economy may be as large as 40% of GDP.

The expenditure-based GDP series only runs to Q3 2016. Listed company reports and anecdotal evidence, however, point to still soft household demand.

Turning to the Q3 2017 data, we see positive base effects: Q3 2016 was the low point in the recession of five quarters and saw particularly low oil output of 1.61 mbpd, at least according to the latest revised figures. We are looking for GDP growth of at least 1.3% y/y in the current quarter.

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