Domestic demand growth ranged at the levels forecast in the Plan and has been the main pillar of development. Private consumption expenditure expanded at an average annual real rate of about 5% during the period 1989-93, in line with the target of the Plan, despite the downward trend which was observed particularly in consumption, of certain durable consumer goods during 1993. The expansion of employment and incomes at comparatively high rates, despite the adverse conditions in the first half of 1991 and during 1993, the expansionary impetus which came from the transactions of the public sector, the reduction of the real interest rates and in general the comfortable financing conditions, as well as the expectations which prevailed at times regarding the imposition of new indirect taxes have been the major factors which fuelled consumption.

Public consumption expanded at an average annual rate of about 5% in real terms during the 1989-93 period, slightly higher than the target of 4,5%, set in the Plan. This development was mainly attributed to the significant increase of employment in the public sector, 2,5% compared to 1% annually, which was the target of the Plan. During 1993, corrective measures were introduced which included, inter alia, a freeze in new recruitments within the context of the policy of the new Government to improve public finances.

Investment activity was maintained at satisfactory levels 25% of the G.D.P. in 1993, and compares favourably with the levels of investment activity in the countries of the European Union, which is at 20,5% of the G.D.P. on average. However, at the same time, the structural weaknesses of investment have become more pronounced given that the share of construction in total investment increased in contrast to the provisions of the Plan.

Source: www.kypros.org