EIU expects lower growth

The October 2005 Country Report on Cyprus by the Economic Intelligence Unit (EIU) forecasts that the growth rate of GDP for 2005 and 2006 will reach 3.6% and 3.0% respectively compared to their previous estimate of 3.8% and 3.5% respectively.

The EIU forecasts inflation rate for 2005 and 2006 to reach 2.3% and 2.4% respectively; 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 performance, the EIU expects the fiscal deficit to reach 2.6% of GDP for 2005 (unchanged from their previous forecast) whilst the report forecasts a further improvement for 2006 to 2.3% of GDP (unchanged from their previous forecast).

In its revised 2006 State Budget, the Ministry of Finance forecasts fiscal deficit to reach 1.7% of GDP, following the implementation of all fiscal measures included in the revised Convergence Programme.

Finally, the EIU report includes its first forecast for 2007 GDP growth rate which is estimated to reach 3.4%, whilst fiscal deficit and inflation rate are forecasted to reach 1.7% of GDP and 2.2%.