THE LATEST estimates provided by CySTAT, the Cyprus Statistical Service, reveal that Cyprus went into recession during April-June 2009 as its Gross Domestic Product (GDP) contracted over the period for the second successive quarter.
Real GDP (seasonally adjusted) shrunk by 0.5% in the second quarter, following a contraction of 0.6% during the first quarter of the year.
The economy’s contraction during the second quarter is attributed mainly to the very negative growth rates experienced by hotels & restaurants as well as the negative performance of manufacturing, construction, trade and transport activities.
On a more positive note, financial intermediation (banking) and broad services (mainly the public sector) continue to record positive growth rates but at a slower rate, according to the Statistical Service’s figures.
Tourism and construction performance
Tourism and construction play a major role in the Cyprus economy. The service sector (including tourism) contributes 79% to GDP and employs 71% of the labour force.
Tourist arrivals dropped by 10.8% to 883,002 during the first half of 2009 while property sales fell to 3,591 compared to the 8,610 sold during the first half of 2008.
So far this year, sales of property to non-Cypriots have fallen by a massive 75%.
Last week, Finance Minister Charilaos Stavrakis said that one of the main sources of the gaping hole in public revenue was a result of the considerable drop in property transactions across the island.
Developers and estate agents have consistently lobbied the government to decrease taxation on the housing market and to reduce the red tape surrounding the process for securing title deeds, two factors which they believe seriously damaging the housing sector in Cyprus.