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EU predicts slowdown in Cyprus property market

THE EU Economic Forecast autumn 2008 predicts a slowdown in the Cyprus Property market. Global growth slows sharply and with the financial crisis having escalated, economic growth in the euro area and the EU grinds almost to a standstill. Subdued real estate activity weighs on 2009 In 2009, economic activity is foreseen to decelerate further […]

THE EU Economic Forecast autumn 2008 predicts a slowdown in the Cyprus Property market. Global growth slows sharply and with the financial crisis having escalated, economic growth in the euro area and the EU grinds almost to a standstill.

Subdued real estate activity weighs on 2009

In 2009, economic activity is foreseen to decelerate further and grow by almost 3%. GDP would continue being driven exclusively by domestic demand. Private consumption would still be robust supported by rising disposable income, which reflects sustained employment and wage growth, as well as the impact of the recent income tax reform.

Compared with the most recent past though, private consumption is projected to show signs of moderation in the face of rising household debt burden, of a severely uncertain environment and of the ongoing international financial crisis.

Housing investment will decelerate strongly and weigh on growth, largely due to a subdued demand for dwellings by non-residents. As a result, housing prices, mainly in the coastal areas, are foreseen to somehow moderate.

The projected slowdown in private consumption and deceleration in investment should put a brake on import growth.Exports of goods would grow only moderately while exports of services are expected to grow below their long-term trend, due to the adverse external conditions. The contribution of net exports to GDP growth will remain negative.

GDP growth is projected to recover mildly in 2010, on the back of a soft rebound in private consumption and investment. Imports are foreseen to follow. In line with an improving external environment and demand, exports, particularly of services, are projected also to rebound. However, the contribution of net exports to growth will improve only marginally while the current account deficit is projected to remain at about 10% of GDP.

For the EU’s full set of forecasts for Cyprus, click here

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