Cyprus 5.2% Q2 GDP decline surprises on the upside

Real GDP in the second quarter declined on a seasonally adjusted basis by 5.2% compared with the same period of 2012, according to the latest flash estimate by the Statistical Service, Cystat.
This came after a decline of 4.7% in the first quarter.
On a non-seasonally adjusted basis, the decline was 5.4% in the second quarter, after a fall of 4.8% in the first.
For the first half of the year as a whole, real GDP fell by around 5% (seasonally adjusted) and therefore looks on course to come in lower than the 8.7% drop forecast in April by the troika—the European Commission, European Central Bank and IMF.
Nevertheless, the country remains in deep recession. Real GDP marked its eighth consecutive quarter on quarter decline, falling by 1.4% in the second quarter compared with 1.7% in the first.
Many fear that 2014 to be more difficult than 2013, as the impact of the crisis accumulates.
The unemployment rate according to Eurostat hit 17.3% in June, from 14.3% in January.
Cypriot banks were closed for nearly two weeks at the end of March as a result of the terms of the bailout that included an unprecedented “haircut”: a loss for uninsured depositors over EUR 100,000 at the second largest bank, Laiki (Cyprus Popular Bank), and the conversion into shares of a proportion of deposits over EUR 100,000 at Bank of Cyprus, the country’s largest bank.
The GDP figures are the third piece of “not such bad” news in recent weeks.
First, after the troika’s review at the end of July the IMF said that Cyprus was “on track” and had made “good progress”.
Second, the proportion of uninsured deposits at Bank of Cyprus converted into shares was a lower than expected 47.5% (less than the 60% set aside) and Bank of Cyprus is now fully capitalised, with a Core Tier 1 ratio of 12.4%.
Cyprus is expected to receive a tranche of EUR 1.5 bln in September for the recapitalisation of the co-operatives.
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