GDP sees 4.1% contraction in Q1

Cyprus GDP contracted by 4.1% in seasonally adjusted terms, during the 1st quarter of 2014, compared with the same quarter in 2013, which compares favourably with the prediction 4.8% annual contraction that is included in the third review of the economic adjustment programme, the Finance Ministry announced on Monday. Unemployment, in monthly seasonally adjusted figures, increased from 14.8% in March 2013 to 17.4% in March 2014, reflecting the effect of a protracted slowdown in economic activity, the Ministry said. According to the Ministry’s calculations, during the first four months of the year tourist arrivals increased by 1.4% compared to the same period in 2013 and revenues from tourism in January-February 2014 increased by 4.8% compared to JanuaryFebruary 2013.

Also inflation decreased at a rate of -0.4% in April 2014 compared to -0.9% in March 2014 and for 2014 it stands so far at -1%.

Exports of goods increased by 2.8% in January-March 2014 compared to the same period in 2013.

The Finance Ministry said the general government budget balance was in deficit during the first quarter of 2014, of EUR 20 mln (-0.1% of GDP) compared to target deficit of EUR 143 mln (-0.9% of GDP). The primary balance was in surplus during the same quarter, of EUR 104 mln (0.7% of GDP) compared to target deficit of EUR 5 mln (0% of GDP).

Total revenue reached EUR 1,567 mln during the first quarter of 2014, exhibiting an improvement of EUR 84 mln vis-a-vis the forecast and total expenditure reached EUR 1,587 mln, exhibiting a decline of EUR 39 mln vis-à-vis the forecast.

In accordance with the updated macroeconomic scenario, the budget balance is estimated to reach a deficit of 5.3% of GDP in 2014 compared to a deficit of 5.4% the year before and primary balance is estimated to exhibit an improvement vis-à-vis last years’ level, as a percentage to GDP, falling to about -1.7% in 2014 from -2% the year before. The Ministry said the government debt remained stable at EUR 18.45 bn at the end March 2014 vis-a-vis EUR 18.4 bn at the end of December 2013. Short term debt yields have been following a downward trend during first quarter of 2014 dropping from 4.72% at the end of Q4 2013 to 4.48%, whereas long term bond yields continued to drop drastically during the same quarter and through April, with rates dropping around 5% for the first time since July 2011, it added. The Ministry said it continues with the implementation of the roadmap for the gradual relaxation of the restrictive measures on capital flows and currently it has completed stage 2 of the roadmap and has started implementing measures in stage 3. As from the 30th of May 2014 all restrictive measures on domestic transactions were lifted, it added.

The Ministry said that the next Programme disbursements are scheduled in June-July 2014 from the ESM (EUR 600 mn) and the IMF (estimated around EUR 85 mn), whereas the 4th Programme tranche was disbursed in April 2014 amounting to a total of EUR 233 mn.