By Hamza Hendawi
THE ECONOMY, forecast to grow by an impressive 4.7 per cent this year, remained firmly on course in the first nine months of the year, thanks to an expansion in tourism and a revival in domestic demand.
A survey conducted in October by the Finance Ministry’s Department of Statistics and Research also found that local entrepreneurs were more optimistic about their businesses’ future and demand at present than they had been a year ago.
In a report released yesterday, the department said activity in the vital construction sector continued to pick up, albeit modestly, in the January- August period. Manufacturing remained at last year’s levels, while agriculture showed an improvement after last year’s sharp decline.
On the whole, the report appeared to paint a picture of an economy that is growing at a respectable rate despite the troubles besieging some sectors.
The modest growth in the construction sector, however, bodes well for the economy as a whole since the long-term durability of this activity, e.g. houses and office blocks, is widely used to gauge the level of public confidence in the economy and in political and security prospects.
The report said a total of 1.8 million tourists came to Cyprus in the January-September period. A separate report issued last week by the Department of Research and Statistics said that a total of 290,441 tourists had arrived on the island in October, taking up to about 2.1 million the number of tourists who have come to the island in the year’s first 10 months.
Quoting a provisional estimate by the Cyprus Tourism Organisation, the department said that the island’s earnings from tourism in the first six months of 1998 totalled £324.6 million, compared to £313 million in the corresponding period of 1997. Beside June, the peak months of the season are July, August and September.
The CTO also said that the average expenditure of tourists per day rose by 2 per cent in the first six months of the year over the same period of 1997.
Tourism is the motor of the island’s economy, earning about £1 billion a year. It accounts for about 20 per cent of GDP and is the largest single employer on the island. This has, in turn, led many to call on government planners to try and reduce dependence on tourism.
Continuing with the stream of good news, yesterday’s report said inflation fell to 2.5 per cent in the first nine months of the year, a drop of one percentage point over the same period last year. Unemployment also fell due to the general revival in economic activity with only 10,483 people officially registered as unemployed in the January-August period of 1998. A “large increase” of joblessness, however, was recorded in the construction sector.
The number of construction-related workers out of a job at the end of August reached 1,556, compared to 1,255 at the same time last year.
The sector has been slowly recovering in recent months, with authorised building permits, a main indicator in the business, rising by 5.3 per cent in the January-August period.
The rise, however, was mostly in commercial buildings. Permits for residential buildings, which account for more than 60 per cent of all permits, actually fell by 4.9 per cent, according to the report. A much larger decline, 68.4 per cent, was recorded in the number of building permits for hotels and tourist apartments.
Manufacturing, another problem-ridden sector, remained stuck at last year’s levels during the first eight months of the year. All industries registered a decline in production during the period in question except for textiles and leather products, food, beverages and tobacco and non-metallic mineral products, such as cement.
Like some sectors on the island, manufacturing has been undermined by productivity levels that are lower than real wage increases, thus losing its competitiveness.
The rising labour costs and the excessive strength of unions in some cases have combined to bring about the shrinking of the sector’s contribution to GDP from 14.7 per cent in 1990 to 11.2 per cent last year.
