Cyprus slashes GDP growth rate to 3%

Minister of Finance Charilaos Stavrakis has slashed the GDP growth estimate for 2009 from 3.7% to 3.0% as a result of the global economic crisis and the financial meltdown. The previous 3.7% forecast had been made a month ago when the Cyprus Finance Ministry was still insisting that the global credit crunch would not have an impact on Cyprus. Following the about-turn, the government was forced to revise its fiscal surplus forecast from 0.7% of GDP to 0.3% for 2009.
Speaking before the Finance Committee in the House of Representatives, the Minister of Finance explained that for each 1% change of GDP, there is a respective 0.39% (of GDP) change in government revenues. Nevertheless, the MoF argued that due to the structure of public finances, this indicator will be slightly higher at 0.45- 0.5% for 2009 and would thus account for an EUR 85 mln decline in revenue (considering GDP would reach EUR 17.5bln).