Cyprus economic slump deepens in second quarter on bailout deal

Cyprus’s economic contraction deepened in the second quarter after the country agreed to wage- cuts and the closure of its second-largest lender to secure an international bailout.

Gross domestic product declined 1.4 percent from the first quarter, when it fell 1.7 percent, the Cyprus Statistical Service said in a statement on its website today. That’s the eighth consecutive quarterly contraction. Non-seasonally adjusted GDP fell 5.4 percent from a year earlier.

The Cypriot economy, the third-smallest in the 17-nation euro region last year, will shrink a cumulative 13 percent this year and next, the country’s international creditors said on July 31. Macroeconomic uncertainty and the magnitude of the country’s recession are the key short-term risks to the 10 billion-euro ($13.3 billion) agreed on March 25, said Delia Velculescu, the International Monetary Fund’s mission chief.

The euro area emerged from a record-long recession in the second quarter, led by Germany and France. The 17-nation economy expanded 0.3 percent in the three months through June after six quarterly contractions.

Cypriot GDP declined 5.2 percent in the second quarter from a year earlier when adjusted for seasonal swings and working days, Cystat said.

Unemployment in Cyprus rose 32 percent in July from the same month of 2012 to the highest level since data collection started in 1994, the statistics service said Aug. 5. Measures agreed by Cyprus in return for the bailout included a tax on bank deposits of more than 100,000 euros and the closure of Cyprus Popular Bank Pcl, which led to the introduction of capital controls.