NICOSIA, July 17 (Xinhua) -- Downward projections by the European Commission on the economic growth of Cyprus in 2019 have been too conservative and did not take into account actual economic expansion, mostly in the construction sector, the chief economist of Hellenic Bank, Andreas Assiotis said on Wednesday.
At the same time, officials of the construction sector said fears that it is getting too hot and may lead to a bubble and a new bank crisis are not warranted.
Assiotis told Insider, the economic section of Phileleftheros newspaper, that estimates of the European Commission released a week ago of a 2.9 percent expansion of the Cypriot economy in 2019 and 2.6 percent in 2020, down from 3.9 percent in 2018, will prove inaccurate as they are not justified by current economic developments.
The European Commission said in its summer projections for each one of the 28 EU countries that the growth of Cypriot economy is slowing down as a result of weaker tourism this year and uncertainties caused by Brexit.
"This is not quite correct as it does not take into consideration that development over the past few years has been diversified, with several sectors making a bigger contribution than before," Assiotis noted.
He said that though tourism has slowed down, the economy grew by 3.4 percent in the first quarter of 2019.
"This is a sign that some other sectors have contributed to this development," he said.
Assiotis said that available data showed that economic development was due to improved employment, more available income as a result of less unemployed people and an increase in salaries which fuel consumption. He added that foreign investments and healthier lending by banks are helping the economy in a dynamic way.
"Though it is not possible to sustain a 4 percent annual increase indefinitely and there will be a slowdown, this will not be so marked and prospects are that the growth will be near the long term target," Assiotis said.
In a related development, the president of the Cyprus Land and Building Developers Association (LBDA), Pantelis Leptos, said that 2,111 new building licenses were issued during the first four months of this year, a considerable increase compared to 1,984 licenses in the same period of 2018.
The increase in investment in new buildings was more marked. It went up by 133.4 per cent. The area to be built went up by 43.5 per cent and the number of housing units increased by 38.5 per cent.
This, he explained, is an indication that the size of individual developments has grown.
The president of the Big Land Developers Association, Andreas Demetriades, dismissed concerns of a bubble in the building sector and a possible impact of the banks similar to the one that led to the 2013 economic crisis.
He said that the difference now is that the building activities are not funded by bank loans, but by down payments by the buyers.
"We build housing units in line with demand. There will not be a surplus of offer as what is being constructed will be purchased," he added.
This view is being reflected in the latest bulletin of the Cyprus Central Bank on housing prices, which says that they are expected to go up further, but not to the point of a possible overheating of the sector.