According to the latest PricewaterhouseCoopers report covering the European economies, “unlike most European economies positive growth is expected for Cyprus in 2009, albeit at a weaker pace than in recent years”.

An anticipated slowdown in the tourism and construction sectors is likely to be the main cause for weaker economic growth.

“In the fourth quarter of 2008 the Cypriot economy was one of only three in Euroland to grow (the others being Greece and Slovakia). Preliminary estimates suggest that Cypriot economic growth stagnated in the first quarter of 2009 - a significant deterioration from the growth of 0.5% achieved in the previous quarter. PricewaterhouseCoopers’ latest economic analysis shows that growth in the final quarter of 2008 was aided by a contraction in imports, which fell by a significant 17.7%. However, consumer spending and investment activity also both contracted in the period”, the report said.

“Cypriot economic growth is expected to decelerate in 2009 with GDP forecast to expand by 1.4%, followed by stronger growth of 2.1% in 2010. This is still well above the forecast Euroland contraction of 4% in 2009”, it added.

According to the report, “the annual rate of consumer price inflation, which stood at 3.1% in November 2008, fell to only 0.9% in March 2009. After several years of diverging inflation, Cypriot inflation is now back around the Euroland average”.

“The Cypriot unemployment rate increased to 4.9% in March 2009, the highest rate since June 2006. Cypriot unemployment is expected to increase in the short term with the largest movements occurring in the sectors most vulnerable to the downturn, namely tourism and real estate”, PricewaterhouseCoopers noted.

“The global slowdown has had an adverse impact on the Cypriot tourism industry. The number of tourists from the United Kingdom fell by 9.9% in April 2009 compared to the prior year. This is having a significant impact on Cypriot tourist revenues, given that visitors from the United Kingdom account for over 40% of the total number of tourists to the island”, it stressed.

Yael Selfin, Head of Macro Consulting at PricewaterhouseCoopers, commented that: “The Cypriot economy is expected to fare better than most European economies over the next 2 years. However, despite the continued fall in inflation, consumer spending is expected to weaken in the coming months as rising unemployment and low levels of consumer sentiment take their toll”.


source: (published 09/06/2009)