Annual growth could still exceed 1%
Real GDP growth in Cyprus accelerated in the second quarter, according to the flash estimate, growing in seasonally adjusted terms by 0.4% compared with the previous quarter, after zero growth in the first quarter.
Growth slowed compared with the same period of the previous year, however, mainly because the first quarter of 2010 showed a decline, therefore the first quarter of 2011 was measured against a low baseline.
Therefore, real GDP slowed to 1.4% (seasonally adjusted) in the second quarter, from 1.6% in the first.
On a non seasonally adjusted basis, real GDP grew by 1.5% year on year in the second quarter, compared with 1.7% in the first.
A full breakdown of figures will be published in the coming weeks.
Slight revisions to the first quarter
The flash estimate for the second quarter made revisions to real GDP growth in the first quarter.
Seasonally adjusted real GDP was initially reported to have declined slightly by 0.03% over the previous quarter, compared with growth of 0.05% in the revised estimate. However, both are officially reported at 0%.
Compared with the same period of the previous year and in seasonally adjusted terms, real GDP for the first quarter was initially reported at 1.7% compared with 1.6% in the revised estimate.
Growth rate for the full year hit by electricity
If quarterly GDP were to grow by 0.4% in both the third and the fourth quarters, Cyprus would record a real GDP growth rate of around growth 1.4% for the full year.
However, this is unlikely after the explosion on July 11 that knocked out the country’s main power station, since electricity output is one of the components of GDP by sector and accounts together with gas and water for 2% of GDP.
The Electricity Authority of Cyprus has now bought in enough capacity to reduce power cuts to a minimum. But the reduction in total electricity output and the disruption to the rest of the economy in July and early August (many construction companies said they would stop work for the whole of August) will affect overall GDP numbers.
Nevertheless, even if there is a big quarterly decline of say 1% compared with the previous quarter in Q3, my analysis shows that we would still be looking at a growth rate of above 1% for the full year.
Initial estimates after the blast put the growth rate of the year at zero.
Fiona Mullen, Director Sapienta Economics Ltd
www.sapientaeconomics.com
