Positive European Commission projections for Cyprus' economy
Brussels, May 9 - The European Commission's projections for the course of the Cypriot economy in 2006 and 2007 are especially positive, since the island's economy is projected to continue growing solidly at 3.8% over the forecast horizon and Cyprus will continue to meet the criteria to join the Economic and Monetary Union (EMU).
According to the Commission's spring economic forecasts for 2006-2007, published on Monday, it appears that the public deficit will be around 2.1% compared to 2.8% at the end of 2005. This means that Cyprus meets the main criterion for EMU accession, which is that the deficit is below 3% of GDP. At the end of 2003, the deficit was 6.3% of GDP.
GDP is projected to reach 3.8% this year, with a similar increase in 2007. These growth rates are significantly higher than the average in the EU.
Public debt reached its highest point at the end of 2004 with 71.7% of GDP, and will be around 70.5% in 2006 and 70.1% of GDP in 2007. Although the criterion for EMU accession provides that the debt must not be higher than 60% of GDP, it stipulates that the debt can be higher as long as it is following a declining path, as in the case of Cyprus.
Inflation is foreseen to be under control in 2006 and 2007, and will be lower than the criterion for EMU accession. In 2006 it is expected to reach 2.4% and in 2007 2.2%. The criterion provides for an inflation rate of 2.6% and is calculated based on the average of the three best performances in the Eurozone, adding 1.5 units.
Furthermore, the Commission projects that unemployment will be around 5.4% both in 2006 and 2007.