TOKYO (Reuters – Japan’s economy is likely to have contracted over the first three month of 2012 as the lingering COVID-19 pandemic impacted consumption and exported goods, a Reuters poll indicated.

This weak reading highlights the challenges policymakers have to face when trying to pull the third largest economy in the world out of its pandemic-induced depression.

Although the economy will likely rebound in the third quarter, Russia’s invasion and occupation of Ukraine have impacted the prospects. This has resulted in a spike in oil prices as well as increased commodity and fuel costs.

Analysts polled at Reuters believe that the gross domestic product (GDP), contracted 1.8% annually in January-March after a 4.6% growth in the preceding quarter. According to Reuters analysts, this would mean a quarter-to-quarter contraction of 0.4%.

According to Saisuke Sakai (senior economist, Mizuho Research and Technologies), “The contraction in January-March GDP was mostly due to a big drop in consumption.”

“The slowdown in global growth and the Ukraine crisis will keep Japan from a more robust recovery,” he stated.

Private consumption which makes up more than half the GDP fell 0.5% due to the Omicron epidemic that forced government officials to restrict activity.

Due to weak exports, external demand (exports minus imports) likely slowed GDP growth by 0.3 percent.

The poll shows that capital expenditure is forecast to rise 0.7%, following a 0.3% increase during the quarter before.

Cabinet Office expects to publish January-March GDP data on May 18 at 8:50 (2335 GMT May 17).