Is the Cyprus economy slowing?

The Cyprus Statistical Service Cystat issued its first â€œflash estimateâ€ for economic growth in the fourth quarter on February 14, estimating real GDP growth at 4.3% in the fourth quarter of 2007 over the fourth quarter of 2006.

At the same time, Cystat left unchanged its estimate issued in late December 2007, in which it estimated that the real GDP growth rate for the whole of 2007 was 4.4%, compared with 4.0% in 2006.

While the year-on-year growth rate was still respectable, the more significant growth rate for future projections is the quarter-on-quarter growth rate. This is compared, on a seasonally adjusted basis, with the previous quarter.

Compared with the third quarter, growth was estimated at only 0.7% in the fourth quarter. This was the slowest rate of growth in 2007.

Indeed, the quarterly growth rate has dipped as low as 0.7% only two other times since the beginning of 2005.

Moreover, this lower growth rate was recorded despite an acceleration in credit growth towards the end of 2007. Strong credit growth was accompanied by a bubbly property market which was driven both by credit and the expectation of VAT on undeveloped land (the date of which has now become a moveable feast). Building permits authorised rose in value by 12.5% in 2007.

If the property market was still buoyant therefore, other parts of the economy must have experienced a sharper slowdown.

The government must have realised this earlier than the rest of us via the corporate tax filings for December and the most recent VAT receipts.

A responsible member of the eurozone would put the brakes on spending under such circumstances. But this government, hellbent on winning the February 17 and 24 elections, has been spending its way into recession, leaving the next president, whoever that may be, to pick up the pieces.

Fiona Mullen