Cyprus CB Governor calls for caution regarding prospects of economy

Cyprus Central Bank Governor Athanasios Orphanides called for caution regarding the prospects of the Cypriot economy, mainly due to the inflation tendencies, the continuing rally of oil prices and the overheating of the Cypriot economy.
Orphanides was received by Cyprus President Demetris Christofias. During the meeting, the prospects of the Cypriot economy as well as the Euro area forecasts were discussed.
”The prospects are relatively good,” Orphanides said after the meeting, adding however ”at this moment the greatest concern is the inflation tendencies existing in the Cypriot economy as well as in the Euro area, which Cyprus joined on January 1, 2008.”
Orphanides, who departed for Frankfurt to attend the European Central Bank Governing Council to he held Wednesday, said that no recession is expected to hit Europe. ”We expect some economic slowdown compared to the growth rate of last year,” he pointed out.
He also expressed “concern” over the rising oil prices, adding this is why we should be cautious over the overheating of the economy.
”We must be careful not to give salary increases that exceed the productivity’s level in Cyprus and when the oil prices increase the productivity is reduced,” he added.
According to Cyprus Finance Ministry’s forecasts, inflation for 2008 is expected to reach 2.5% or 2.75% compared to 2.4% in 2007.