07/10/2005 08:16
The ongoing oil crisis led to a number of revisions of the anticipated growth rate in Cyprus. After the Finance Ministry, foreign analysts proceeded to a revision of their forecasts, since they believe that the official estimate of 4% is not feasible. In its latest report for Cyprus, the EIU anticipates a slowdown in 2005 and 2006.
The negative forecasts for the prospects of the Cyprus economy coincide with the submission of the state budget 2006 to Parliament. The budget provides for a significant drop in fiscal deficit and is based on an optimistic scenario that economy will grow by 4.4%. The government believes that growth will contribute to the increase in state revenues by 13.5%.
The Finance Ministry, however, revised its forecasts on growth rate for 2005 and 2006 recently, within the framework of the ongoing oil crisis. It expects that the rally might moderate growth rate by 0.6%.
In its October report, the EIU believes that even the revised Finance Ministry forecast is optimistic. “GDP growth in Cyprus stood at an estimated 3.6% in 2005, after 3.8% in 2004 and we expect a further fall to 3% in 2006”, the EIU reported. The Economist expects that the correction in private consumption will probably continue in 2006, while “constriction investment should slow down further in 2006 in response to rising prices”.
Despite the revised forecasts on growth, the EIU insists in its previous estimates with regard to unemployment and fiscal deficit. The EIU anticipates that unemployment will reach 3.5% in 2005 before falling to 3.3% in 2006, while deficit will be about 2.6% of GDP in 2005, falling to 2.3% of GDP in 2006.
The EIU also expects that the average rate of inflation will be 2.3% in 2005 and 2.4% in 2006. “Consumer price inflation averaged 2.5% in the first eight months of 2005”, it reported. It also expects that rate “cuts before late in 2006 are unlikely because the Central Bank remains concerned about the inflationary impact of high oil prices”. It is noted that in early September the Central Bank left interest rates unchanged.
For the first time this year, the EIU proceeded to forecasts for the course of Cyprus economy in 2007. It expects that growth rate will rise to 3.4%, the deficit will fall to 1.7% of GDP, inflation will be 2.2% and unemployment will stand at 3.3%.
The negative forecasts for the prospects of the Cyprus economy coincide with the submission of the state budget 2006 to Parliament. The budget provides for a significant drop in fiscal deficit and is based on an optimistic scenario that economy will grow by 4.4%. The government believes that growth will contribute to the increase in state revenues by 13.5%.
The Finance Ministry, however, revised its forecasts on growth rate for 2005 and 2006 recently, within the framework of the ongoing oil crisis. It expects that the rally might moderate growth rate by 0.6%.
In its October report, the EIU believes that even the revised Finance Ministry forecast is optimistic. “GDP growth in Cyprus stood at an estimated 3.6% in 2005, after 3.8% in 2004 and we expect a further fall to 3% in 2006”, the EIU reported. The Economist expects that the correction in private consumption will probably continue in 2006, while “constriction investment should slow down further in 2006 in response to rising prices”.
Despite the revised forecasts on growth, the EIU insists in its previous estimates with regard to unemployment and fiscal deficit. The EIU anticipates that unemployment will reach 3.5% in 2005 before falling to 3.3% in 2006, while deficit will be about 2.6% of GDP in 2005, falling to 2.3% of GDP in 2006.
The EIU also expects that the average rate of inflation will be 2.3% in 2005 and 2.4% in 2006. “Consumer price inflation averaged 2.5% in the first eight months of 2005”, it reported. It also expects that rate “cuts before late in 2006 are unlikely because the Central Bank remains concerned about the inflationary impact of high oil prices”. It is noted that in early September the Central Bank left interest rates unchanged.
For the first time this year, the EIU proceeded to forecasts for the course of Cyprus economy in 2007. It expects that growth rate will rise to 3.4%, the deficit will fall to 1.7% of GDP, inflation will be 2.2% and unemployment will stand at 3.3%.
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