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Good news from Cyprus: Q2 contraction only 1.4 percent

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

Publishing date: 23 August 2013
Authors: Zsolt Darvas

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

About the authors

Zsolt Darvas

Zsolt Darvas is a Senior Fellow at Bruegel and a part-time Senior Research Fellow at the Corvinus University of Budapest. He joined Bruegel in 2008 as a Visiting Fellow, and became a Research Fellow in 2009 and a Senior Fellow in 2013.

From 2005 to 2008, he was the Research Advisor of the Argenta Financial Research Group in Budapest. Before that, he worked at the research unit of the Central Bank of Hungary (1994-2005) where he served as Deputy Head.

Zsolt holds a Ph.D. in Economics from Corvinus University of Budapest where he teaches courses in Econometrics but also at other institutions since 1994. His research interests include macroeconomics, international economics, central banking and time series analysis.