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MOSL: ECOSCOPE- 2QFY19 GDP growth in line with expectations; Expect growth to decelerate in 2H

ECOSCOPE: 2QFY19 GDP growth in line with expectations; Expect growth to decelerate in 2H on account of adverse base and limited fiscal support

 

• 2QFY19 real GDP growth eased to 7.1% YoY, lower than market consensus of 7.5%, but in line with . Real GVA grew 6.9% (our/consensus estimate: 7.1%/7.3%), primarily due to weaker-than-expected services sector.
• Although fiscal spending and investments posted a double-digit growth, weak private consumption and very high net imports dragged GDP growth in 2QFY19.
• Implied domestic savings fell to a new low of 25.6% in 2QFY19, while investment rate improved to 30.9% on account of a wider current account deficit (CAD). Growth in investments was driven by the private sector (households + corporate), while government capex declined in the quarter.
• Recent data confirms that strong growth in 1HCY18 was driven by a favorable base (1HFY18: 6%), which is set to fade in 2H (2HFY18: 7.4%). Further, as we had highlighted , fiscal support is unlikely to sustain in the second half of FY19. Accordingly, we expect real GDP growth to weaken further to 6.5% in 2HFY19 and expect full-year FY19 growth to come in at ~7%.