Cyprus growth dips in the first quarter of 2008

But households are still spending

Economic growth in Cyprus slowed in the first quarter of 2008 but remained fairly buoyant considering the global credit crunch.
Gross domestic product (GDP) rose in real terms (ie adjusted for inflation) by 4.0% over the first quarter of 2007, compared with growth of 4.3% in the fourth quarter of 2007 and 4.6% in the third quarter of 2007.
The pace of growth has therefore slowed for two consecutive quarters. However, growth compared with the previous quarter was still a buoyant 1%–the same pace as the average of 2007–meaning that Cyprus is far from recession.
On a seasonally adjusted basis, growth slowed a bit more sharply, to 3.9% from 4.3% in the fourth quarter of 2007 and 4.5% in the third quarter.
The main reason for the slowdown appears to be coming from exports of goods and services, which slowed to seasonally adjusted growth of 5.6% in the first quarter of 2008, from growth of 10.9% in the fourth quarter of 2007. This performance has probably not been helped by a weak start to the year for tourism.
There was also a slowdown in investment: housing construction slowed to growth of 3.9% in the first quarter from 7% in the fourth quarter.
Remarkably, government expenditure, which accounts for 17% of GDP, declined by 1% compared with the year-earlier period in the first quarter (seasonally adjusted), despite the presidential election held in February. One can only assume that some of the expenditure for that period will actually be paid for in later quarters.
Household expenditure, by contrast, actually accelerated, to growth of 8% in the first quarter of 2008 compared with 7.6% in the fourth quarter of 2007.

The Statistical Service reported that on the supply side, the main stimulus to growth was provided by the broad trade division (+4.9%), in which the sectors of hotels, transport and communication are also included.
At the same time, deceleration was observed in the broad divisions of financial, real estate, renting and business activities (+3.8%) and construction (+3.6%).