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Finance Minister: Cyprus Economy Developing Well
2008-08-07 09:17:08

Nicosia, Aug 7 – Cyprus Finance Minister Charilaos Stavrakis has said that Cyprus public finances are developing well in spite of the huge problems which the world economy is facing.

Speaking during a press conference, Mr. Stavrakis said the Ministry has revised its economic growth forecast for 2008 upwards to around 4.0% on the back of an increase in private demand and foreign investment.

''The rate of economic growth has exceeded our initial expectations of between 3.5% 3.7%, and will reach some four percent by the close of year,'' Minister Stavrakis stated, adding that is the second highest rate in the Eurozone after Slovenia.

Growth was spurred mainly by the services industry, primarily foreign investment and international companies on the island, and private demand, he said.

''Cyprus's geographical position means we have an advantage when it comes to foreign investment on the island, and we have certainly reaped the benefits,'' he added. With regard to tourism, he said that there are signs of recession from traditional markets such as Britain but there is a considerable growth of tourist arrivals from other countries like Russia.

With regard to unemployment, the Finance Minister said that there are still conditions of full employment in Cyprus, where foreign labor is also imported, while unemployment in the rest of Europe reaches 7-8%.

Referring to inflation, he said that due to the reduction in the price of oil, the outlook has improved and it is estimated that inflation will reach approximately 5.6% in July. Mr. Stavrakis said that this is the highest inflation rate expected for the next two years. He noted that inflation will gradually be reduced and is expected to reach 4.8-5% by the end of this year and will drop dramatically in 2009 below 3%.

On public finances, Mr. Stavrakis said that during the first six months of 2008 there was a surplus slightly over 0.8% of the GDP, that is approximately €135 million. He said that Cyprus’ commitment towards Europe for a surplus of 0.5% remains and will be fulfilled.

Additionally, Mr. Stavrakis said that public debt which reached 60% of the GDP will drop significantly in 2008, mainly due to the payment of some sinking funds. As he noted, public debt is expected to drop to 47.5% by the end of the year and not to 48.5% as predicted a month ago.

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