ECONOMY

Recovery in Cyprus seen picking up

Cyprus’s economy will grow 1.5 percent in 2011 from 0.6 percent in 2010, according to Finance Minister Charilaos Stavrakis, who yesterday unveiled the country’s 2011 state budget. The island economy, the second smallest in the eurozone, registered a 1.7 percent contraction in 2009. It returned to growth in the first quarter of 2010 after five successive quarters of recession. Cyprus registered growth of 0.4 percent in the first quarter, and 0.6 percent in the second, with the recovery rooted mainly in a recovery in the financial services sector. «If this trend continues, it will lead to growth of 0.6 percent for the whole year,» Stavrakis told a news conference in Nicosia. The third quarter of the year was expected to show stronger growth, factoring in a 6 percent increase in tourism during the peak summer season of July and August. «Even with very conservative estimates [Q3 growth] will exceed 0.5 percent,» the minister said. Tourism directly represents about 11 percent of Cyprus’s gross domestic product of 17.2 billion euros. A summer rebound in arrivals followed a 10.9 percent drop in tourists last year. Stavrakis said the island «has no other choice» but to slash its bloated fiscal deficit, as he called for broad political support for additional austerity measures. Political partisanship must give way to consensus on ways to save an additional 150 million euros over and above cutbacks included in the budget for 2011, he said. The savings would bring the fiscal deficit down to 4.5 percent of GDP next year, in line with a pledge to the European Union. Without the additional savings, Cyprus would miss the mark by about 1 percentage point, he added. Stavrakis said the government is sticking to plans to reduce the public sector payrolls – currently numbering around 53,000 employees in the country of 800,000 – by 1,000 over the next three years while shaving millions off state operating expenses. He will meet with political parties and trade unions to come up with additional cost-cutting measures. On the job front, unemployment is projected at 6.5 percent in 2011, a 0.5 percent drop over the previous year.