Cyprus GDP growth target revised higher

The Ministry of Finance (MoF) has revised higher the GDP growth target for 2007 to 4.2% from 4.0% previously forecast but maintains the 2008 target at 4.0%, while inflation is expected at 2.5% in 2007 and 3.3% in 2008. The growth of inflation in 2008 results from the increase in VAT and the sustainability of oil prices at high levels. Unemployment rate is anticipated around 4.3% in 2007 vs. 4.5% in 2006, whilst in 2008 is expected at 4.0%.

GDP’s main drivers are private consumption demand, the increased investment demand especially in buoyant real estate sector and export of services. As far as economic activity is concerned, the fastest growth is expected in the areas of construction, banking and real estate. In 2008 GDP growth is expected around 4.0%, with external demand for tourism services being in the spotlight.

Fiscal deficit and Public debt are expected to decline further to 1.0% of GDP in 2007 vs. 1.5% in 2006, whilst a further improvement is expected in 2008 (0.5% of GDP). Public debt is expected to improve from 65.2% of GDP in 2006 to 60.9% in 2007 and 52.5% in 2008. Finally, wage increases in 2007 are expected around 5.2% in nominal terms and 2.7% in real terms.