Real GDP growth at 3.6% in Q3

Financial sector booms

 

Economic growth decelerated slightly in the third quarter according to the latest figures from the Statistical Service, CYSTAT. Real GDP growth rose in real terms by 3.6% in the third quarter of 2006 compared with the third quarter of 2005. In the second quarter, it rose by 3.9%, according to upwardly revised figures.

Growth also slowed compared with the previous quarter. On a seasonally adjusted basis, Q3 2006 GDP rose by 0.6% over the previous quarter, while in Q2 2006 it rose by 1.3%.

 

Financial sector up 30.2%

 

At the same time, CYSTAT reported what it terms indicative indices for the third quarter.

These include financial intermediation services (essentially banking), up 30.2% compared with the same period of 2005. This comes as no surprise: as reported by the Financial Mirror on Wednesday, banks boosted nine-month profits by 154%.

Another strong performer has been wholesale and retail trade turnover (by value), up by 7.7% and building permits up 5.2% in the first eight months.

Both electricity and telecommunications, which are good indicators of general economic activity, rose strongly. The production of electricity was up 6.3% and telecommunications was up 4.9%.

On the negative side, CYSTAT noted that exports of goods fell 18.1%, manufacturing production fell by 1%, vehicle registrations were down 2.6%, tourist arrivals were down by 2.6% (although revenue was up 2.6%), and imports of goods (which act as a drag on real GDP growth), were up by 5.6%.

Together these will have dragged down the overall growth rate.

 

Growth rate of 3.8% for the full year

 

When new quarterly figures are produced we have got into the habit of providing the Financial Mirror estimate for the full year.

However, this time the Statistical Service has beaten us to it: on Tuesday it issued an estimate for the full year of 3.8%.

This implies fairly strong quarterly growth of 1.2% in the fourth quarter. However, GDP figures tend to get revised up in later quarters and there are also some discrepancies between quarterly and annual figures, so the end result will probably be higher figures in early quarters and a lower figure in the fourth.

The Statistical Service noted that “any differences observed between annual and quarterly National Accounts data are due to the fact that there is a short time-lag between the recent introduction of methodological changes in annual National Accounts (FISIM allocation, Chain-linking method) and the forthcoming introduction of the same changes in quarterly National Accounts as well”.

 

Fiona Mullen

Sapienta Economics Ltd