GDP growth in 2009 – analysis

The Cyprus economy shrank by 1.7% in 2009, according to the latest full figures on the national accounts, despite government efforts to prop up the economy.
The main reason for the fall was household consumption, which fell by 3.1% in 2009, having bounded ahead by 8.5% in 2008. Household consumption is by far the largest expenditure item in the national accounts, accounting for 68% of GDP.
Gross fixed capital formation, representing mainly investment in construction and machinery, fell by 1.2% for the whole year, having contracted sharply in the second half.
Figures on inventories show that there de-stocking acted as a large drag on growth, bringing GDP down by 8.8%.
Exports of goods and services, depressed by a 10.9% drop in tourism arrivals, fell by 11.8%. However, the negative impact of this on growth was more than offset by the 19.8% fall in imports of goods and services. These were depressed by a collapse in demand for cars and a decline in construction.
The only expenditure item that grew was government consumption, which rose by 5.8%, although this was slower than the 6.2% recorded in 2008.
In the fourth quarter real GDP fell by 3.0% over the corresponding quarter of 2008. Based on seasonally and working day adjusted data, it fell in the same period by 2.8%.
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