Cen­tral Bank re­vises eco­nomic growth fore­cast to 4.1%

Financial Mirror (Cyprus) - - OPINION -

The Cen­tral Bank of Cyprus (CBC) has pos­i­tively re­vised its es­ti­mate of the is­land’s GDP growth this year to 4.1% from the pre­vi­ously pre­dicted 3.4%, the su­per­vi­sory body said in its lat­est eco­nomic bul­letin.

Eco­nomic growth is also ex­pected to stay at a sim­i­lar level next year at 3.9%, and slow­down slightly to a lesser 3.5% in 2020, the bank said.

GDP growth in 2017 was 3.9% which made Cyprus one of the fastest grow­ing economies in Europe.

CBC said the main fac­tors be­hind the up­ward re­vi­sion of the fore­cast is a ro­bust and boom­ing tourism sec­tor and the bet­ter flow of in­vest­ment.

The bank said that pri­vate con­sump­tion was also a key driver for eco­nomic growth over the fore­see­able fu­ture.

“In 2018, pri­vate con­sump­tion is ex­pected to in­crease 2.5% af­ter grow­ing by 4.2% in 2017, re­flect­ing the in­crease in dis­pos­able in­come re­sult­ing mainly from an in­crease in em­ploy­ment and to a lesser de­gree higher earn­ings,” the bank said.

An­other fac­tor be­hind more dis­posal in­come and con­fi­dence in the Cyprus econ­omy was more peo­ple find­ing a job and, to a lesser ex­tent, bet­ter wages.

But an in­crease in wages is ex­pected to have a pos­i­tive ef­fect on Cypriot house­hold’s sav­ings, which dur­ing the re­ces­sion were used to main­tain a level of con­sump­tion, and went to­wards re­pay­ment of non-per­form­ing loans, the bank said.

Al­though still rel­a­tively high, the CBC ex­pects un­em­ploy­ment to con­tinue to de­cline from its zenith of 17.6% in 2015 and stay be­low dou­ble dig­its.

The un­em­ploy­ment rate is ex­pected to flat­ten out this year at 9.1% from 11% last year and pro­jected to drop to 7.4% in 2019 and keep on a down­ward in 2020 to 6.5%.

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