GDP growth in Cyprus over the first quarter of 2012 contracted by 1.6 percent compared to a year earlier, the Cyprus Statistical Service reported on Friday.

Negative growth rates were recorded by the secondary sector of the economy (construction, manufacturing, electricity), as well as in the sectors of trade and transport. Positive growth rates, however, were shown in the sectors of banking, public administration, education and health.

The news will make it harder for the Cyprus government to urgently raise 1.8 billion euros (2.42 billion U.S. dollars) to recapitalize the island's second largest lender, Popular Bank, by the end of this month.

The country's central bank on Thursday said the economy is expected to shrink by 1.1 percent this year. The bank its new estimates took into account the repercussions of a munitions explosion last year which destroyed the island's main power station, extensive exposure of its banking system to Greek debt and its shrinking construction and manufacturing sectors.

It also cited diminishing consumer confidence following indications that Cyprus may have to apply to the European Union for bailout funds to help recapitalize its banking system.