“Flash estimate” Cyprus GDP at 3.7% in first quarter

Banking sector still booming

 

According to the “flash estimate” produced by the Cyprus Statistical Service, CYSTAT on Tuesday, GDP growth rose in real terms in the first quarter of 2007 by 3.7% compared with the first quarter of 2006.

Flash estimates are common practice in the EU but this is the first “flash estimate” produced by Cyprus.

Flash estimates are not accompanied by the usual quarter-on-quarter GDP figures or revisions to previous quarters. This means that it is not possible to know at this stage whether a 3.7% growth rate constitutes an acceleration or a deceleration in growth.

However, based on our own calculations, either growth of economic activity accelerated in the first quarter or GDP growth was higher than previously reported in earlier quarters.

Looking at the indicative indices mentioned by Cystat, a case could be made either way.

On the one had, tourist arrivals (Jan-Mar) fell by 3.9% year on year and tourism revenue (Jan-Feb) by 4.5%. Electricity output (Jan-Mar) fell by 2.0% and exports of goods in the same period by 11.4%.

At the same time, manufacturing (up 0.5%) and building permits (up 3.1%) and telecommunications output (up 3.9%) rose fairly modestly in Jan-Feb and imports of goods rose by just 3.4% in the first quarter.

On the other hand, retail trade (Jan-Mar) rose by a strong 8%, air transport (Jan-Feb) by a stronger 9.3% (despite the drop in tourism) and financial intermediation services (banking) by an astonishing 25% in the first quarter.

Although tourism remains the single most important sector in Cyprus, it seems that domestic demand, driven by an awful lot of bank credit, is driving growth.

 

Fiona Mullen

Sapienta Economics Ltd