Cyprus economy flat in first quarter

(NICOSIA) - The Cyprus economy recorded zero growth in the first quarter of 2011 pointing to a suttering recovery in the Mediterranean island, official data showed on Friday.

Based on seasonally and working day adjusted data, gross domestic product did not grow in the first three months, compared to a revised 0.4 percent in the last quarter of 2010, according to a flash estimate from the state statistical service.

The flat growth rate is the island's worst economic performance since the last quarter of 2009.

Year-on-year, GDP in real terms increased 1.7 percent in the first quarter, the state statistical service said.

"The secondary sector of the economy (construction, manufacturing) continues to present negative growth rates, while positive growth rates are recorded in the sectors of trade, tourism, banking and education, health and other services," the service said.

Last year, the holiday island saw tourism recover with receipts improving by 3.8 percent reaching 1.54 billion euros, but the property market continued to struggle.

With tourism and construction contributing about 30 percent of GDP, the credit crunch and recession in Europe had a major impact on the economy, which contracted by 1.7 percent in 2009 -- the island's worst result since the Turkish invasion of 1974.

Partly relying on improved tourism figures, the finance ministry projects GDP growth of 1.5 percent for 2011 - from one percent last year -- and is confident the fiscal deficit will drop below 4.5 percent of GDP.

Cyprus is on an austerity drive to reduce its 5.3 percent deficit last year to below the eurozone target of three percent by 2012.

Cyprus has suffered a series of credit-rating downgrades as agencies fret about the exposure of the island's large banking sector to Greek debt, as well as the government's deficit.