Cypriot economy marks record level contraction

The Cypriot economy contracted by a record 5.7 percent in the second quarter of 2013 compared with the same period of last year, according to data made available by the Statistics Service (Cystat) on Saturday.Cystat said the recession was bigger than the original projection of 5.2 percent made last month but it was still much lower than an estimate of 8.7 percent expected by Cyprus's international lenders. Still, the contraction was the biggest since the 1970's when Cyprus lost most of its resources after Turkish troops occupied part of the island in response to a coup by Greek army officers. Cyprus expects to cash this month a second 1.5-billion euro tranche of a 10-billion euro bailout by the Eurogroup and the International Monetary Fund. The eastern Mediterranean island is still struggling to rebuild its banking system after it took a hit when international lenders forced an all-time first recapitalization of its largest lender with creditors' money and the winding down of its second largest bank. Cystat said the recession on a quarterly basis was 1.6 percent against an original projection of 1.4 percent. Mostly hit was the construction section which marked a 28.8 percent contraction on a yearly basis, with all other sectors recording a yearly recession of between 1 percent and 7.7 percent. Cyprus is not expected to return to growth before 2015, when a modest increase of GDP is expected. However, the Cypriot government expects the economy to pick up in a dynamic way when rich natural gas reserves discovered in offshore gas fields are brought to the surface in 2019 or 2020.