Will the sales tax hike be postponed yet again?

Following the renewed contraction in output last quarter, we are lowering our forecast for GDP growth this year from 1.5% to 1.0%. If domestic demand doesn’t pick up soon, the government may decide to postpone the sales tax hike that is currently scheduled for 2017. In that case, there would be no boost to demand this year from consumers bringing forward spending ahead of the tax change. Growth could be as low as 0.5% this year, though the outlook for next year would brighten.