Eurostat data showed Cyprus’s economy grew at an annual rate of 3.3 per cent in the second quarter, comfortably outpacing the European Union’s 1.4 per cent and the eurozone’s 1.2 per cent, even as geopolitical turmoil in the Middle East continued to weigh on the wider region.
The data also showed seasonally adjusted GDP rising 0.8 per cent quarter-on-quarter, up from 0.5 per cent in the first quarter.
The Fiscal Council said, however, that growth between April and June was driven mainly by consumption rather than the economy’s productive base, with total consumption rising 5.2 per cent, outpacing the overall growth rate of 3.3 per cent.
Trade, tourism, transport and catering made the largest contribution, growing 4.7 per cent and adding one percentage point to GDP. Communications contributed 0.5 percentage points, financial activities 0.3 percentage points and construction another 0.3 percentage points, with the three sectors together accounting for 2.1 per cent of GDP.
Fiscal Council raises concerns
The Fiscal Council, drawing mainly on Statistical Service data and quarterly national accounts, expressed scepticism over a 1.8 per cent decline in exports in the second quarter and recommended close monitoring, given the geopolitical situation in the Middle East.
It also highlighted a 2 per cent fall in investment, describing it as a negative development and warning that prolonged investment stagnation could hurt growth in the medium term.
Concentrating growth in trade, transport and tourism increases the economy’s exposure to external shocks, it warned, such as the geopolitical situation in the Middle East, air connectivity, freight rates and energy costs.
Europe’s growth remains weak
Europe found a way out of stagnation in the second quarter, though growth remained subdued. The eurozone recorded anaemic growth of 0.6 per cent and the EU 0.7 per cent, driven largely by the balance of exports and imports (0.8 per cent) and, to a lesser extent, household consumption (0.2 per cent).
Among member states, Ireland’s economy grew fastest, at 10.2 per cent, followed by Slovenia at 1.8 per cent. Austria was the only country to record a negative rate, contracting by 0.1 per cent.
Across the Atlantic, the US economy grew at a slower quarterly pace of 0.4 per cent. On an annual basis, however, US GDP rose by 2.1 per cent, outpacing both the EU and the eurozone.
