Growth of 1.6% af­ter 14Qs re­ces­sion

Financial Mirror (Cyprus) - - FRONT PAGE -

Af­ter three and a half years of re­ces­sion or 14 quar­ters of neg­a­tive growth, the Cyprus econ­omy ex­panded in the first quar­ter of 2015, with GDP grow­ing 1.6% from the pre­vi­ous quar­ter, the fastest in the Eu­ro­zone ac­cord­ing to Euro­stat, de­feat­ing Euro­pean Com­mis­sion pre­dic­tions for con­tin­ued con­trac­tion, al­beit mildly, this year.

This fol­lows last week’s re­sump­tion of in­spec­tions for the 10 bln euro bailout pro­gramme by tech­nocrats from the Troika of in­ter­na­tional lenders (ECB, EC, IMF) af­ter a six month sus­pen­sion, which Fi­nance Min­is­ter Har­ris Ge­or­giades sounded con­fi­dent would be con­cluded with a favourable re­view.

Cyprus recorded a “pos­i­tive growth rate af­ter 14 quar­ters of con­trac­tion. Re­form and con­sol­i­da­tion ef­forts are pay­ing off,” Ge­or­giades said in a state­ment.

But to exit re­ces­sion, Cyprus needs to record three con­sec­u­tive quar­ters of growth, job cre­ation and in­creased de­mand, a pe­riod en­joyed briefly from the first quar­ter of 2010 to the sec­ond quar­ter of 2011. Af­ter that it sank back into re­ces­sion on a run­away public sec­tor deficit and pil­ing na­tional debt, a bank­ing sec­tor on the verge of col­lapse due to ex­po­sure to toxic Greek gov­ern­ment bonds, a deadly power sta­tion blast that sent af­ter­shocks through­out the econ­omy and ris­ing un­em­ploy­ment.

Pri­vati­sa­tion Com­mis­sioner Con­stanti­nos Petrides ex­pressed re­served op­ti­mism about the lat­est data, say­ing that “for the first time since 2011 we have a pos­i­tive growth rate, al­beit mar­ginal. The cri­sis is not over and the risks re­main. But we are tak­ing steady steps.”

The Fi­nance Min­istry said in a state­ment that the re­cov­ery is still at its early stages and thus re­mains frag­ile.

“For that rea­son it is im­per­a­tive that the com­mon ef­forts for re­forms and devel­op­ment con­tinue, far from pre­ma­ture cel­e­bra­tions, but with a neg­a­tiv­ity, driven by a con­fi­dence that we can make it,” Ge­or­giades said.

In its May 5 Spring fore­cast, the Euro­pean Com­mis­sion had said that the is­land’s econ­omy would con­tract by 0.5% this year be­fore re­turn­ing to a growth of 1.4% in 2016.

The quar­ter on quar­ter growth rate of 1.6% of GDP, as seen by the Euro­stat flash es­ti­mate for Q1 2015, fol­lowed q-o-q con­trac­tions of -0.2%, -0.8% and -0.4%, while the av­er­age growth rates for both the Eu­ro­zone and the whole of the Euro­pean Union were 0.4% af­ter con­tin­ued frac­tional ex­pan­sion in the last three quar­ters.

Euro­stat said that sea­son­ally ad­justed GDP rose by 0.4% in both the euro area (EA19) and the EU28 dur­ing the first quar­ter of 2015, com­pared with the pre­vi­ous quar­ter.

In the fourth quar­ter of 2014, GDP grew by 0.3% in the euro area and by 0.4% in the EU28. Com­pared with the same quar­ter of the pre­vi­ous year, sea­son­ally ad­justed GDP rose by 1.0% in the euro area and by 1.4% in the EU28 in the first quar­ter of 2015, af­ter +0.9% and +1.3%, re­spec­tively, in the pre­vi­ous quar­ter.

Dur­ing the first quar­ter of 2015, GDP in the United States in­creased by 0.1% com­pared with the pre­vi­ous quar­ter (af­ter +0.5% in the fourth quar­ter of 2014). Com­pared with the same quar­ter of the pre­vi­ous year, GDP grew by 3.0% (af­ter +2.4% in the pre­vi­ous quar­ter).

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