Cyprus economy to grow by 3.5% in 2008

The Cyprus economy is expected to grow between 3.5% to 3.7% in 2008, Charilaos Stavrakis, Minister of Finance, has said. “Under the current circumstances, the rate of economic growth is considered satisfactory, consistently above the EU27 average,” he added.

Speaking at an event organised by the Cyprus Branch of the Institute of Directors, Stavrakis noted that despite international economic challenges, the local economy is a robust economy with satisfactory growth rates, almost full employment, controlled inflation, low interest rates and healthy public finances.
However, Stavrakis admitted that “the rising oil and food prices will eventually affect the economy of Cyprus”.

The inflation rate, said Stavrakis, is expected to range between 4% and 4.5%, compared to 2.5% in 2007, and the unemployment rate for the current year is expected to remain at the same levels as in 2007, when it fell to 3.9% of the economically active population.
The Cypriot Minister also noted that public finances remain at a good level and the fiscal balance is expected to remain in surplus, around 0.5% of the Gross Domestic Product. In addition, public debt is projected to fall to 48% of the GDP in 2008.

Stavrakis pointed out that the decrease in the rate of growth in the construction and banking sectors leads to a smaller increase of the government revenue and puts incremental pressure on the fiscal balance.
“The number of foreign investments in Cyprus continues to grow significantly, according to the data of the Department of the Registrar of Companies and Official Receiver, with Russia becoming the most important economic partner of Cyprus,” Stavrakis noted and added: “Russia is a country with very good economic potential.”
Regarding inflation, Stavrakis stressed that its rising trend needs attention, because any price increase affects Cyprus to a greater extent than other competitive to Cyprus countries. “As a result, Cyprus becomes less competitive”, he added.