Government yesterday said slower 2004 GDP growth could largely be attributed to a rise in business costs constraining international business expansion.

In total, the Island?s GDP expanded by 5.1 percent, or 1.6 percent in real growth, figures released by the Statistics Department on Friday showed. International business contributed more than 20 percent of total GDP.

?Much of the headline growth in the international business sector was wiped out by very substantial increases in intermediate consumption costs which rose by some 61 percent in 2004,? Finance Minister Paula Cox said in a statement yesterday.

The net effect of the rise in costs was that overall growth of 6.7 percent was constrained to around two percent. Growth also slowed in comparison to the sector?s double-digit expansion from 2000 to 2003.

Government said higher intermediate consumption costs borne by international businesses ? the Island?s key economic pillar ? included the professional services purchased by the sector.

Overall, Ms Cox said the Island?s moderate 1.6 percent economic growth was ?somewhat counter-intuitive given fairly strong indicators in many sectors?, including the Island?s international business sector, financial services sector, construction industry, real estate sector all seeing expansion in 2004.

There was also a rebound in hotel and restaurant activity, after a 2003 slump when Hurricane Fabian hit.

Government had previously forecast Bermuda would see three percent growth in 2004. Gross domestic product is a key economic indicator as it measures a country?s total production of goods and services.

Ms Cox conceded that Bermuda?s GDP growth in 2004 was ?lower than anticipated?, but said average growth since 1998 ? when the PLP Government came to office ? was around 21 percent, or about three percent per year, on average.

For 2004, Bermuda?s GDP at constant market prices measured $3.6 billion. Of that, international business ? which in 2001 surpassed tourism as the Island?s leading economic pillar ? contributed close to $1 billion, or $724 million in real terms.

Real GDP uses constant base-year prices to value the economy?s production of goods and services.

Ms Cox added that the 2004 economic picture should be weighed against the economic woes of earlier years, including a world-wide economic downturn in 2001 that left the economies of numerous countries, including Bermuda, at or bordering recession. The Island?s GDP growth in 2001 measured a slim 0.5 percent.

Overall she said the Island?s economic picture from 1998 through 2004 was ?one of growth and an overall increase in prosperity for the vast majority of Bermudians?. Government is also predicting continued growth, having last week re-issued a 2.5 percent to three percent GDP growth forecast for 2005.

While Bermudians, in general, are lower paid than non-Bermudian workers, all households on the Island have seen a rise in incomes. From 1993 to 2004, the annual household income rose from $65,676 to $106,236.

In 2004, 23 percent of Bermuda jobs were filled by expatriates and 24 percent of Bermuda homes were headed by a non-Bermudian.