For the second consecutive quarter the Central Bank’s Business Perceptions Survey has shown an improvement in expectations about the economy in general for the coming six months in the business sector.

The bank’s survey, carried in the bank’s Quarterly Review published last week, reported a significant number of respondents (41 per cent, as against 25 per cent of the previous quarter) as expressing positive feelings about the immediate future, while those expecting a worsening situation remained virtually unchanged.

Domestically oriented firms, which were more optimistic about their sales and profitability, foresaw an expansion in their workforce and higher wage awards leading to an increased wage bill.

Export-oriented firms expect a modest rise in profitability but virtually stable sales and lower selling prices. They were also more optimistic about the economic situation, especially those in the machinery and equipment sector.

The overall perception of the economic situation for the coming six months rose to a level (see graph) reached only in the second quarter of 2004, just before EU accession.

A close examination of the graph also shows that the highest expectation registered in the past four years was reached just before or around the EU accession referendum and the subsequent general election.

With the current political debate in the country focusing on the country’s economic performance and with euro accession coming up, such an indication of optimism about the economy could also colour the way people perceive the economy and thus also the way they vote.

Quarterly Review also reported that real GDP rose by 2.7 per cent in the third quarter of 2006, the fifth consecutive quarterly increase in economic growth.

The latest expansion stemmed mainly from higher net exports and, to a lesser extent, higher consumption, even while gross fixed capital formation continued to decline mainly due to reduced government expenditure on road construction and on the new hospital.

Fewer tourists, an 11.6 per cent decrease in holidaymakers, also marked the third quarter.