The European Commission is predicting an increase in unemployment in Cyprus during 2010, a report entitled “Monthly Labour Market Monitor June 2010” of the Employment, Social Affairs and Equal Opportunities Department of the European Commission says.
According to the report, economic activity in Cyprus should contract by 0.4 % in 2010, before recovering to 1.3 % growth in 2011. The weak economic outlook is expected to weigh on the labour market in 2010 (with an expected decline in employment of 0.7 %), particularly in labour-intensive sectors such as construction and tourism.
The measures announced by the Cypriot government which will be taken in order to reduce the public deficit (estimated at 6.1 % of GDP in 2009), notably a freeze on new
recruitment in the public sector and cuts in the budgets of the ministries, may also affect the labour market, it notes.
“As employment declines, the unemployment rate is expected to rise to historically high levels, reaching about 7 % in 2011 (after 6.7 % in 2010),” the report adds.
Outlining recent developments and expectations in selected member states, the report notes that after showing strong resilience to the economic recession until the end of 2008, Cyprus's economy was subsequently affected by a decline in GDP of 1.7 % in 2009.
In the first quarter of 2010, economic activity contracted for the sixth consecutive quarter, though close to stagnation (-0.2 %). Compared with the same period of the previous year, GDP had declined by 2.3 %.
This, the report said, contrasts with the gradual recovery of GDP in the EU as a whole since the third quarter of 2009. “The recession in Cyprus is due to weak domestic demand and to a difficult external environment leading to declining exports”, it noted.
The labour market, it went on to add, has been quite badly affected by the economic recession, especially in the labour–intensive sectors. In the first quarter of 2010, total employment was down by 5,000 (a fall of 1.3 %) compared to one year before. Worst hit were the construction sector (down 3 000 or -8 %) and the trade, transport and communication sector (down 5 000 or -3.8 %), although this negative trend has been partly offset by a rise in employment in the other service sectors (+4 000 jobs or 3.5 %).
The unemployment rate in Cyprus reached 6.8 % in April 2010, which was up 0.1 pps on the previous month and up 1.7 pps on April 2009, the report said. This number remains one of the lowest rates among EU member states, it said, and is almost 3 pps below the EU average. However, it has increased substantially since the beginning of the crisis: the rate almost doubled from around 3.5 % (14 000 persons) in September 2008 to 6.8 % (roughly 28 000 persons) in April 2010.
Before the crisis, according to the report, unemployment affected women more than men. Now, however, male (6.9 %) and female (6.7 %) unemployment rates are very similar, due to the stronger increase of unemployment among men, notably over the last quarter. Unemployment, it added, is particularly high among young people (18.1 % in the first quarter, closer than before to the EU average (20.6 %)), and for whom it has increased very substantially since September 2008 (+9.4 pps compared to +4.8 pps for the EU as a whole).
According to the public employment services, the number of job vacancies (non-seasonally adjusted) fell by 3,400 (or 40 %) in the first quarter, showing the downward trend in labour demand.
