Cyprus tourism revenue in the peak month of August was up 2.7 percent on a year earlier, boosting confidence the sector can help the island further out of recession, official figures showed on Friday.

Revenue for August reached 241.1 million euros compared with 234.8 million euros for the same month a year earlier.

Income for the first eight months rose 1.7 percent to 1.05 billion euros from 1.03 billion euros over the same period last year.

The average daily amount spent by tourists in August was 71.3 euros and the average stay was 11.1 days.

Austrians were the biggest spenders at an average 103.40 euros a day, while the recession-hit Greeks were the most frugal, spending just 41.60 euros.

Income from tourism accounts for nearly 12 percent of Cyprus's gross domestic product. It dropped to an estimated 1.49 billion euros last year from 1.79 billion euros in 2008 and 1.85 billion euros in 2007.

Tourist arrivals improved 1.3 percent during the first nine months of 2010, the figures showed.

Arrivals until the end of September reached 1.77 million against 1.754 million during the same period last year.

The increase was boosted by a 4.7 percent surge in holidaymakers in September, reaching 289,126 compared with 276,178 in the same month in 2009.

More visitors from Russia and Germany helped bolster last month's arrivals. There was a 60.8 percent jump in arrivals from Russia and a 22.3 percent increase from Germany.

Russia is being targeted as a market with a huge growth potential underscored by a landmark visit to the island last week by Russian President Dmitry Medvedev.

However, there was a 6.2 percent decrease in British tourists - the island's largest source of holidaymakers - and a 2.9 percent dip from Sweden.

In 2009, arrivals plunged 10.9 percent to 2.14 million - the lowest level since 1997.

The recession in Europe has taken its toll on Cyprus, whose Gross Domestic Product contracted by 1.7 percent in 2009, its worst performance since 1974.

But the government predicts the economy will grow by at least 0.5 percent this year after kicking off an unprecedented year-long recession.

Finance Minister Charilaos Stavrakis told reporters on Friday that better than expected revenue from tourism and the service sector could produce a final growth figure of 0.8 percent.

Cyprus is trying to reduce a fiscal deficit that ballooned to 6.1 percent of GDP last year - double the EU's permitted ceiling of three percent.

The European Commission has put the island's finances on fiscal watch after the deficit breached the three percent barrier and Cyprus has until 2012 to get back within it.