Cyprus real GDP growth could hit 4% this year

Finance and real estate grows fastest

Latest quarterly figures for gross domestic product show that the real GDP growth rate recorded 3.8% in the third quarter of 2005, when compared with the corresponding period of the previous year, just a touch below our September forecast of 3.9%.

Compared with the previous quarter, and on a seasonally adjusted basis, the growth rate was 0.9%. This was lower than our forecast of 1.1%. However, the overall impact on the outlook for the full year has been offset by an upward revision to the second quarter figure: to 1.0% from a previous figure of 0.7%.

Growth still looks on course to reach between 3.5% to 4.0%, as we forecast three months ago. Moreover, given the margin of error and the latest revisions to earlier quarters, it is quite possible that the growth rate will hit the magical 4% this year, after 3.8% in 2004 (a figure which was also recently revised upwards).

According to the Statistical Service, growth is attributed to the positive performances of a wide range of sectors: construction, wholesale and retail trade, financial services, transport and communications, hotels and restaurants and other services activities.

It notes that building permits by area rose by 11.5% year on year in the third quarter, financial intermediation rose by 12.4%, tourists arrivals by 6.9%, telecommunications volume by 7.0%, electricity volume up 5.0%, and the turnover value of wholesale and retail trade up by 2.8% etc.

Finance and real estate grows fastest

A breakdown of national accounts by category shows that the fastest growing category in the third quarter was finance and real estate. It rose by 1.9% (seasonally adjusted) compared with the previous quarter, after a strong 2.2% rise in the second quarter.

Construction was the second fastest category, up by 1.4% both in the third quarter and the second.

Meanwhile, the category that combines wholesale and retail trade, transport, and hotels and restaurants decelerated slightly to 0.5%, after 1.4% growth in the second quarter.

Fiona Mullen