November 21, 2017 7:31AM/ Proshare Research
Fig2: Contribution to GDP
Beyond The Figures
As earlier mentioned, the third quarter 2017 GDP figures beat market estimates, which is also cheery to note that there is uplift in the cycle. However, at the same time the figures also mask structural weakness in the economy which could be deceptive. The growth is largely oil induced, with most of the other sectors of the economy either still stuck into a bloodletting position or recently drawn into a bloodletting position
Fig 3: Growth Across Sectors
The slowdown in the growth of discretional items such as food and textiles suggest lean consumption as firm struggle to manage stock. Sectors such as information technology, transportation and accommodation which were resilient in period of negative downturn are already displaying weakness as they seem to be running out of growth. Moreover the 49% slump in oil refining in the third quarter of 2017 do add to the concern as it can influence our balance of payment negatively.
Even though, exchange rate stability has been achieved, output accrued from the Finance and Insurance sector slumped by 5.96% in the 3rd quarter of 2017. Slumps in the said sector do raise a red flag and calls for caution. Repeated slump in the Finance and Insurance sector could pose as a threat to financial stability, thereby triggering a capitulation in the cycle.
Certainly, improved oil production and price have provided a scaffold for uplift for the cycle, regardless growth remains largely vulnerable to possible cyclical headwinds. It leaves the external economy in a more export concentrated position, with export injection more than ever before vulnerable to cyclical shocks.
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