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Agricultural weakness due to drought weighed heavily on economic activity last year. GDP growth was just 2.8% in Q1-Q3 2016, primarily due to a 1.1% contraction in agriculture. As a result, we have cut our GDP growth estimate for 2016 to 3.3%, down sharply from our October projection of 5.1%.
Looking ahead, growth is expected to pick up markedly this year, with a recovery in agriculture, a loosening of monetary conditions and strong momentum in the services sector lifting GDP growth to 5.8% in 2017. Furthermore, the external balances improved markedly in 2016 due to a substantial rise in gold exports, subdued international energy prices and lower capital goods imports. However, a recovery in capital goods imports in line with reinvigorated infrastructure investment efforts, together with a steady recovery in world oil prices, is expected to result in a widening of the external deficit over the medium term.
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