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UK at fault for Cyprus GDP glitch?

Jaimie Kanwar

Cyprus has been forced to make a downward revision on its expected GDP growth for 2008...

According to Finance Minister Charilaos Stavrakis, GDP growth 'may drop to 3.4%-3.6%' - down sharply from the previous official forecast of 3.8%. Mr Stavrakis was, however, eager to point out that despite the slowdown, the GDP growth rate was 'double that of the other eurozone partners'. In 2007, the Cyprus' GDP growth rate surged to 4.3%.

Speaking at the CFA Society of Cyprus Annual Forecasting Event in Nicosia, Savakis explained the downward revision: “The adverse effects from a slowdown in the US is affecting Europe, but Cyprus is even more exposed to the slowdown now being felt in the UK, which is Cyprus' main supplier of tourists and property purchasers.

“The recent appreciation of the euro against sterling coupled with a decline in home prices in the UK are the two main factors curtailing tourism and new property buyers from the UK. I believe that in view of the slowdown in the UK, and other exogenous developments such as rising oil and commodity prices, the rate of growth for 2008 will be at a slower pace than what we originally were expecting”.