ECONOMY

Cyprus 07 current account gap up to 9.7 pct of GDP

NICOSIA (Reuters) – Cyprus’s 2007 current account deficit widened to 9.7 percent of gross domestic product (GDP) from 5.9 percent the year before, exceeding official forecasts, the island’s central bank said yesterday. The current account deficit grew to 1.5 billion euros ($2.3 billion) from 818 million euros in 2006. «The widening of the current account deficit was a result of an increase in petroleum prices as well as significantly increased demand for automobiles, the result of a substantial reduction of excise tax rates in November 2006,» a central bank spokesman told Reuters. The island’s central bank is concerned over the widening of the current account deficit, which ended up three percentage points above initial forecasts. «The widening (of the current account gap) as well as the increase in loans seem to reflect excessive demand in the economy,» the spokesman said. In December 2007, loans to the private sector grew 32.6 percent year-on-year, fueling strong demand. The central bank has urged government officials to contain spending. «The widening of the current account deficit, combined with high inflation in Cyprus, especially compared to the eurozone, underlines the need to strengthen the competitiveness of the Cyprus economy,» the central bank spokesman said. Last year, the island’s economy grew by an annual 4.4 percent with inflation at 2.4 percent. Cyprus joined the eurozone in January this year.