Central Bank revises 2018 growth forecast upwards to 4.1%

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By Stelios Orphanides

The Central Bank of Cyprus significantly revised its 2018 economic growth forecast upward to 4.1 per cent from a previous 3.4 citing strong exports and domestic demand.

In 2019, the economy is forecast to grow 3.9 per cent with the growth rate slowing down to 3.5 per cent the following year, the central bank said in its June 2018 economic bulletin.

“In 2018, private consumption is expected to increase 2.5 per cent after growing 4.2 per cent in 2017, reflecting the increase in disposable income resulting mainly from an increase in employment and to a lesser degree higher earnings,” the central bank said. Public consumption is forecast to increase 1.8 per cent in 2018 after growing 2.7 per cent the year before due to the increase in wages and the increase in employment in the public sector. The value of exports of goods and services is expected to increase 6.1 per cent this year after growing 3.4 per cent last year while imports are forecast to increase 5.5 per cent, almost half as much they increased last year.

In addition to positively impacting private consumption, the increase in wages is expected to positively affect savings of households, which during the crisis years resorted to their deposits to maintain the level of consumption, and also help repayment of non-performing loans, the central bank said.

Gross fixed capital formation is expected is expected to increase 9 per cent this year after growing a staggering 28 per cent in 2017 resulting from the completion of private sector projects and the purchase of transport equipment, mainly ships, by special purpose vehicles, the central bank said.

The unemployment rate is expected to average this year at 9.1 per cent, compared to 11 per cent last year, with employment increasing 3.5 per cent after growing 3.4 per cent in 2017, it said. In 2019, the unemployment rate is expected to fall to 7.4 per cent.

This year, nominal compensation per worker is expected to increase 1.9 per cent after growing 0.7 per cent last year mainly on pay rises in the public sector triggered by the re-introduction of wage indexation, compensating workers for the loss of purchasing power, and the introduction of annual pay rises, the central bank said.

“The afore-mentioned wage increases are on top of the annual incremental pay increases from 2017, after a wage and pension freeze period expired,” it said.

The harmonised inflation rate is expected to accelerate to 0.9 per cent this year from 0.7 per cent in 2017, before it further accelerates to 1.4 per cent next year, the central bank said.

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About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]

  • Bob Ellis

    Is this the growth of their noses ? We know when anybody talking about economic growth or recovery in Cyprus is lieing, their lips move.

    • Μεσσάρης 1908

      It is another pan-European conspiracy to hurt the feelings of British OAPs in Cyprus.

      • Bob Ellis

        Why not blame everyone else, that wil help Cyprus……..oh, sorry, Cypriots have been doing that for 58 years and look how good things are now.

        • Μεσσάρης 1908

          Blame who ad for what exactly.
          Your delusional conspiracy theories that the economy is not growing?

          • Bob Ellis

            Have you looked at the real economic data ? Cyprus may be trying to swim to the surface but the weight of debt and our horrendous reputation will still drown us.

          • Μεσσάρης 1908

            Yes, disaster is imminent. Save yourselves. Women and children first.

          • Bob Ellis

            I’m okay thanks. Most income and assets off shore. When things go t!ts up my Euros will go even further. Ultimately, I have really become a local as ‘I’m alright, who cares about anyone else’

  • Kevin Ingham

    Good Gad- if things are going so swimmingly we’ll easily have enough money to bailout out our bankrupt banks to boot .Things haven’t looked so splendid since 2008 and it’s obviously a reason for civil services’ pay rises all round- hurrah

  • Philippos

    There should be growth in consumption when you increase the incomes of Government Workers by removing the restrictions in place in the TROIKA Years. This is what has taken the CBC by surprise so the forecast has had to be “improved”. Notably absent of course is any hint of corresponding productivity, so we shall get price increases which makes the exercise not only pointless for the Private Sector, but will shortly increase the Fiscal Deficit, so maybe more taxes in the wings or shall we just borrow more? When the undeserving get rewarded and the deserving don’t you just stoke the furnace of discontent and division. It will go “BANG!” believe me, even in Cyproos

    • SuzieQ

      Spot on!

  • SuzieQ

    Reading this article is like reading a comic.

    • It’s merely a coincidence the statement is made at this time 😉 Oh also we paid Fitch the rating agency for a recent review. Move along nothing to see here…….

      • SuzieQ

        Oh, I see!

  • Barry White

    As the Steward on the Titanic said, ‘it is getting chilly tonight, let’s re-arrange the deck chairs’ Strike up the band!!

    • CM follower

      what? you idiot?

  • CP

    Amazing clarity in this article. Editor could have opted for a simple boring table, but wisely chose to entertain us with a word for word report of what someone said while reading one.