Cyprus finance minister says economy to shrink in 2009

Eurozone member Cyprus will see an economic contraction of 0.5 percent in 2009 but expects an upswing in 2010, its finance minister said on Saturday. Finance minister Charilaos Stavrakis said the island would see an upswing in growth of 0.5 percent in 2010.
"Projections for 2009 see a negative growth rate of -0.5 percent, which still remains one of the best in the eurozone..." Stavrakis told reporters, presenting the island's budget for 2010. "We agree with the European Commission's projections that we will have a positive growth rate in the regions of 0.5 percent in 2010, but if global economic recovery begins sooner and is more vigorous, then it is possible that we will have an even better growth rate," he said.
Deficit figures would be maintained within a 3 percent limit dictated by the eurozone, he said. Negative growth projections come after a series of bad GDP data that the Mediterranean island fell into a technical recession in the second quarter of the year. "The main target is for the deficit not to exceed 3.0 percent, preferably 2.9 percent," Stavrakis said.
In the first half, the public deficit reached 2.4 percent of GDP. The island's inflation is projected to rise to 2.5 percent in 2010 from 1.0 percent in 2009. Cyprus's tourism sector, which represents 10.6 percent of Cyprus's GDP, suffered a blow this summer season as tourist arrivals to the island plummeted 10.9 percent in January-August, dragging tourism earnings down 15.5 percent over the first seven months of 2009. The International Monetary Fund said in a report this month that Cyprus could register a 3.9 percent deficit in 2009, after posting surpluses in 2007 and 2008.
The finance minister said that the government's development programme would continue, while there will be a freeze on the creation of new jobs in the already bloated public sector over the next 18 months. The island represents 0.2 percent of the eurozone economy. "In what is an especially negative economic climate, with the collapse of fiscal revenues that we have described, our aim is to preserve a deficit below 3 percent, so that we may be one of two or three countries in the eurozone with such a fiscal record," Stavrakis said.