Northern Cyprus - Economy

Economy

The economy of Northern Cyprus is dominated by the services sector (69% of GDP in 2007) which includes the public sector, trade, tourism and education. The revenues gained by the education sector in 2011 was USD 400 million. Industry (light manufacturing) contributes 22% of GDP and agriculture 9%.

Economic development is adversely affected by the continuing Cyprus problem. The Republic of Cyprus, as the internationally recognised authority, has declared airports and ports in the area not under its effective control closed. All UN and EU member states respect the closure of those ports and airports. Because of its disputed status and the embargo placed upon it, Northern Cyprus is heavily dependent on Turkish economic support. Despite some economic development, the country is still dependent on monetary transfers from the Turkish government. Under a July 2006 agreement, Ankara is to provide Northern Cyprus with an economic aid in the amount of $1.3 billion over three years (2006–2008). This is a continuation of ongoing policy under which Turkish government allocates around $400 million annually from its budget to help raise the living standards of the Turkish Cypriots.

Northern Cyprus uses the New Turkish Lira as its currency which links its economy to that of Turkey's. Since the Republic of Cyprus joined the Euro zone and the movement of peoples between the north and south has become more free, the Euro is also in wide circulation. Exports and imports have to go via Turkey unless they are produced locally from materials sourced in Cyprus (or imported via one of the island's recognised ports) and may thus be exported via one of the recognised ports.

Despite the constraints imposed by the lack of international recognition, the nominal GDP growth rates of the economy in 2001-2005 were 5.4%, 6.9%, 11.4%, 15.4% and 10.6%, respectively. The real GDP growth rate in 2007 is estimated at 2%. This growth has been buoyed by the relative stability of the Turkish Lira and a boom in the education and construction sectors.

Between 2002 and 2007, Gross National Product per capita more than tripled (in current US dollars):

• US$4,409 (2002)
• US$5,949 (2003)
• US$8,095 (2004)
• US$10,567 (2005)
• US$11,837 (2006)
• US$14,047 (2007, provisional)

Studies by the World Bank show that the per capita GDP in Northern Cyprus grew to 76% of the per capita GDP in the Republic of Cyprus in PPP-adjusted terms in 2004 (US$22,300 for the Republic of Cyprus and US$16,900 for Northern Cyprus). Official estimates for the GDP per capita in current US dollars are US$8,095 in 2004 and US$11,837 in 2006.

In 2011, North Cyprus sold electricity to the Republic of Cyprus following an explosion in the southern part of the island which affected a large power station.

The Northern Cyprus Water Supply Project, due to be completed in early 2014, is aimed at delivering water for drinking and irrigation from southern Turkey via a pipeline under the Mediterranean Sea.