Powerful growth rebound in March shouldn’t raise expectations
Economic activity growth in March was notably better than in the previous four months. The Central Bank reported a y/y increase of 5.4% in the monthly level of economic activity. But this figure should not raise hopes that the economy will experience a significant growth acceleration in the coming months.
The slowdown in economic activity growth is being reflected in the labor market. Since November 2024, the number of jobs in the formal sector has remained stagnant.
Inflation continues to weaken. The April rate was only 0.03%, marking the fourth consecutive month of decline. Core inflation also dropped, from 0.4% in March to 0.16% in April. That month, the annualized inflation rate was 3.71%, below the target, while core inflation stood at 4.13%.
Against a backdrop of controlled inflation, falling commodity (especially oil) prices and global uncertainty, monetary authorities have opted for caution, even at the expense of significantly below-potential growth. The Central Bank has kept the monetary policy rate at 5.75% annually, and has also maintained the current repo rate (at 6.25%) and the overnight rate (at 4.5%). Similarly, y/y growth of monetary aggregates remained stable compared with previous months. Interest rates therefore rose modestly, and the growth of total credit to the private sector contracted slightly.
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