EIU issues new targets for Cyprus

The Economic Intelligence Unit (EIU) has issued its new growth targets for Cyprus for 2006 and 2007 in its latest country update. The EIU expects growth to hover around 3.4% in 2006 from 3.7% in the previous forecast but stay at 3.6% in 2007.

In its latest report for Cyprus, the EIU stressed the need for a convergence between the Cypriot and the euro interest rates for euro adoption in January 2008. According to the EIU report, the convergence between the Cypriot and the euro area interest rates will be aided by further rate increases from the European Central Bank.

Additionally, the EIU forecasts inflation rate for 2006 to reach 2.4%, in line with their previous estimates. The EIU report forecasts an improvement in the fiscal deficit for 2006 to 1.7% of GDP compared to 2.5% of GDP in 2005, whilst for 2007 the EIU forecasts fiscal deficit at 1.6% of GDP.

The Ministry of Finance in its revised 2006 State Budget forecast GDP growth rate to reach 4.2% in 2006, whilst fiscal deficit is expected to reach 1.9% of GDP, following the implementation of all fiscal measures included in the revised 2005 – 2009 Convergence Program.