Cyprus central bank sees 2009 GDP growth at 0.4%

Cyprus's Central Bank forecast that the island's economy would grow 0.4 percent in 2009, lower than government forecasts and marginally higher than those of the European Commission.
'According to these forecasts the real rate of GDP growth in Cyprus is expected to reach 0.4 percent in 2009 and 0.7 percent during 2010,' Governor Athanasios Orphanides said during the Consultative Economic Committee’s meeting held at the Finance Ministry on Monday.
It is a considerable deterioration from the outlook prepared by the central bank in December 2008, which then forecast Cypriot growth at 2.0 percent in 2009 and 2.5 percent next year.
The European Commission has forecast Cyprus growth at 0.3 percent in 2009, while the Finance Ministry expects it to be around 1.0 percent.
'Our new forecasts took into account the particularly negative external environment and the fact that for the past 10 to 15 years the Cypriot GDP has shown a large degree of correlation with the average rate in euro zone members and, or the EU, which is now being affected by the crisis,' Orphanides said.
However, he said that Cyprus was less exposed because the crisis had generally affected heavy industry and manufacturing in most EU countries. Cyprus represents about 0.2 percent of the euro zone economy and is mainly services-based.
Additionally, the Minister of Finance acknowledged the evidence for further deterioration in local economic activity in the next quarters (ignoring to give new estimates on GDP) and referred to the fast deterioration of fiscal economics, which show a deficit equal to 1.3 percent of GDP in the first four months of 2009, whilst for 2009 it is expected to settle between 2.0-2.5 percent of GDP (vs. 0.9 percent previous estimate of MoF).