A slow economic recovery in 2010 and 2011, with Cyprus lagging behind the EU average in both years is envisaged by the European Commission, setting the scene for the structural adjustment of the economy, according to its autumn economic forecast issued in Brussels on November 3. The Commission said it expects that private consumption growth is likely to be subdued despite nominal wage growth above inflation and cheaper debts as interest rates fall, due to a high household debt burden, tight financial conditions and downbeat consumer sentiment in an uncertain environment. The report also contains a stark warning on wages growth, saying that the disassociation between wages and developments in productivity is undermining the competitiveness of the Cypriot economy. The Commission is not optimistic about the housing market’s future contribution to investment either. Given the economic outlook in Cyprus’ main trading partners, foreign demand for dwellings by non-residents should remain weak. Domestic demand for housing and activity in real estate is also expected to stay subdued, the report said. The Commission’s economists forecast that Cyprus’ gross domestic product (GDP) will decline this year by 0.7%, reaching 0.1% growth next year and 1.3% in 2011.