NICOSIA, July 10 (Xinhua) -- The European Commission downgraded sharply its projections on the economic growth of Cyprus in 2019, on account of "weakness signs of tourism" and weaker exports, according to a Commission report released on Wednesday.
The European Commission said in its three-monthly summer projections prepared by the college of commissioners that it expected a growth of 2.9 percent for the Cypriot economy in 2019 and 2.6 percent in 2020.
The spring projections published in May said the Cypriot economy would grow by 3.1 percent this year and by 2.7 percent in 2020.
The Cypriot finance ministry has said it expected a growth of around 3.5 percent in 2019.
The Commission document said in its section on Cyprus that the economy expanded by a sound 3.9 percent in 2018 on account of strong consumer demand and a favorable foreign demand for Cypriot exports.
However, it added, economic growth slowed down to 3.4 percent in the first quarter of 2019 on a yearly basis, reflecting slower exports.
It further said that consumer trust deteriorated in the first six months of this year while business trust was stabilized, a fact which may indicate that development will be less intensive in the coming months.
But it said that consumer demand is expected to remain sound given the positive developments in unemployment.
Latest data showed that unemployment had dropped to 7.1 percent in May, from a high of 16 percent at the peak of the economic crisis in 2014.
The Commission said that while investments showed a healthy development in the first quarter of 2019 and bank lending was steady, tourism is showing a deterioration, with arrivals down by 1.1 per cent in the first five months of the year relative to the same period last year.
It noted that tourism is the main pillar of the Cypriot economy, and said that the drop reflects the closing down of some airlines servicing Cyprus and a drop in demand by tourists.
The Commission said it expected that the economy of the Eurozone as a whole will grow by 1.2 per cent in 2019 and by 1.4 in 2020, a slight reduction from the spring projection of 1.5 per cent.
In a related development, Eurostat said house prices in Cyprus went up by 4.3 percent in the first quarter of 2019, relative to the same period last year, indicating a strong demand in the construction sector.
This rate was close to a 4.0 percent increase in house prices both in the Euro area and EU as a whole.