EIU forecasts 3.8% growth

The Economic Intelligence Unit (EIU) forecasts that the growth rate of GDP for 2005 will reach 3.8% vs. 3.7% in 2004, according to its Country Report on Cyprus.

Additionally, the EIU forecasts inflation rate to reach 2.3%. However, EIU analysts supported the view that the Cyprus economy is vulnerable to the continuous rise in oil prices as the contribution of petroleum products in the CPI is substantial.

Regarding fiscal economics, the EIU stipulates a further improvement in both the fiscal deficit and public debt as a percentage of GDP premised on the the Government’s efforts to increase revenues (amnesty inflows) and contain expenses. Specifically, the EIU report forecasts fiscal deficit to reach 2.8% of GDP for 2005 whilst the report forecasts a further improvement for 2006 to 2.5% of GDP.

Finally, the EIU believes that following CYP’s entry into the ERM2 in May 2005, there is no longer the possibility of a local currency devaluation.