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Cyprus PIO: News Update in English, 03-10-30
From: The Republic of Cyprus Press and Information Office Server at <http://www.pio.gov.cy/>
[01]Thursday, 30 October 2003 European Commission 2003-2005 forecasts on
Cyprus economy
[02] Belgium convinced that Cyprus' EU accession would act catalytically
towards a settlement
[01] European Commission 2003-2005 forecasts on Cyprus economy
The European Commission, in its economic forecasts 2003-2005 report for the
Euro-zone countries, the EU member states, and the Acceding and Candidate
states, has pointed out the positive growth recorded by the Cyprus economy
in 2002, despite the negative effects of international tension and weak EU
growth. Regarding prospects for 2003, the Commission predicted a modest
real GDP growth of 2% in Cyprus, pushed by domestic demand. For 2004, "a
rebound to 3.4% is expected, increasing in strength in 2005 as external
demand picks up while domestic private demand remains the driving
force". The report, released yesterday by the Commission's Directorate-
General for Economic and Financial Affairs, made particular reference to
the sharp decline in tourist arrivals to the island, in 2002 and the first
half of 2003, due to a difficult international environment. "However", it
noted, "Cyprus still managed GDP growth of 2% that year [2002], supported
by moderate domestic demand".
According to the Commission report, tourist arrivals were expected to
revive gradually in 2004-5, "in line with historical experience but also
reflecting the global economic recovery and positive spill-over of the 2004
Olympic Games in Athens." "Export growth is expected to increase to above
5%, while import growth remains almost nil in 2003 but is foreseen to pick
up in line with the resumption in export and domestic demand expansion", it
was also noted in the report.
"The current account deficit is therefore projected downward from a deficit
of 5.3% of GDP in 2002 to 2.8% by 2005", the report added. As regards costs
and prices, "prices in 2002 and 2003 were mainly pushed by higher VAT
taxation relation to EU accession, while inflation reached 2.8% in 2002 and
ran at 6.3% by March 2003 before easing to 2.4% by August." It was
predicted that for 2003, inflation was expected to peak at 4.3%, but then
to fall back to 2% for the remaining forecast period. Albeit investment for
2003 was foreseen to decline by 4.5%, for the remainder of the forecast
period investment should rebound as "factors stimulating investment are
still in place, such as EU accession, liberalization in financial and
utilities markets, and planned infrastructure projects (airports in Larnaca
and Paphos and a port in Larnaca)." The Commission further underlined that
with unemployment rates at 3.5-3.9%, Cyprus did not have an unemployment
problem. "The labour market is relatively flexible while imported seasonal
labour also takes some of the strain in some labour market segments", the
report said. Regarding public finances, it is noted that the fiscal
consolidation programme was abandoned in 2003 "due to the economic slowdown,
increased defence outlays, and expansionary expenditure measures introduced
to offset subdued external demand."
"For 2003, the deficit is now projected to sharply rise to 5.2% of GDP",
the report suggested, noting that "to counter this slippage, the [Cyprus]
government adopted a new consolidation programme". It concluded by
predicting "a gradually declining - but still relatively high - deficit of
2.9% by 2005".
[02] Belgium convinced that Cyprus' EU accession would act catalytically
towards a settlement
Belgium's Foreign Minister, Mr Louis Michel, has said that both his
government and the European Union were convinced that Cyprus' EU accession,
in 2004, would be a great boost towards the peaceful settlement of the
Cyprus problem. Mr Michel made the aforementioned statement after the
Belgian Senate had ratified, with an overwhelming majority last week, the
Accession Treaty of the ten new EU member states, including Cyprus.
The Minister also made reference to Turkey's accession course, saying that
the Belgian position was determined by the Copenhagen criteria and the
complete adoption of the acquis communautaire by all candidate states.
Before the voting at the Senate, a debate was held during which various
references were made to Cyprus. In particular, Senator Karim Van Overmeire
noted that the EU expected Turkey to adopt a constructive approach
regarding the settlement of the Cyprus issue. "On 1 May 2004 we will
welcome Cyprus as a member state, and the fact that Turkey will be
occupying militarily a part of an EU member state constitutes a transgression",
the Belgian Senator said. Furthermore, Senator Francois Roelants du Vivier
stressed in his intervention that Cyprus' accession to the EU would
contribute positively towards efforts for a settlement. Quoting Enlargement
Commissioner Gunter Verheugen, Mr Vivier said that in May 2004 the EU would
find itself in a unique state where a part of a member state's territory
would be occupied by a candidate country. He added that the key to a
solution was held by Ankara, not Nicosia, and expressed hope that the
Belgian diplomacy would stress that fact to Turkish Prime Minister Tayyip
Erdogan.
From the Republic of Cyprus Press and Information Office (PIO) Server at http://www.pio.gov.cy/
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