The Cyprus economy worsened for the third quarter in a row as gross domestic product shrank by 1.4 per cent in the three months to September from the quarter to June, official figures showed.

Compared to the same quarter of 2008, GDP in real terms - based on seasonally and working day adjusted data - plunged by 2.7 per cent, according to the statistical service's flash estimate.

The economy contracted because of "very negative growth rates" in construction, hotels and restaurants as well as "negative performances" from manufacturing, trade and transport activities, the service said.

"Financial intermediation activities as well as the broader services sector continue to record positive growth rates but at a decelerating rate," it said.

On the back of poor tourism revenue and a stagnant property market the economy is expected to shrink by an overall 0.5 per cent in 2009 - the first annual decline in three decades - but grow by the same margin in 2010.

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