Good news from Cyprus: Q2 contraction only 1.4 percent

by Zsolt Darvas on 23rd August 2013

There was a great news in the Eurostat release of the GDP flash estimate for the second quarter of 2013, which was not much highlighted: the Cypriot economy contracted by only 1.4 percent, less than in the first quarter (1.7 percent contraction; see the table below). After the controversial deal for Cyprus was reached in late March 2013 and its banking system has largely collapsed, several commentators foresaw a dramatic contraction in GDP. I was also pessimistic. While I continue to think that the fundamental problems I highlighted are still there, also, the quarterly seasonally adjusted data can be revised significantly, this relatively modest contraction is great news. If the situation will not deteriorate much, the GDP assumption of the financial assistance programme (8.7 percent average contraction in 2013) may not prove to be optimistic, on the contrary, the annual average GDP contraction may even be smaller than what was assumed. Let’s keep fingers crossed.

Growth rates of GDP in volume (percentage change compared with the previous quarter)

2012

2013

Q3

Q4

Q1

Q2

Euro area

-0.1

-0.6

-0.3

0.3

Germany

0.2

-0.5

0

0.7

France

0.2

-0.2

-0.2

0.5

Italy

0.3

-0.9

-0.6

-0.2

Spain

0.3

-0.8

-0.5

-0.1

Cyprus

0.8

-1.4

-1.7

-1.4

Note: Based on seasonally and working-day adjusted data.

Source: Eurostat News Release 122/2013

    References

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