World Bank Report Shows Turkish Cypriot Economic Recovery Amid Challenges

The economic rebound was bolstered by record high Green Line crossings and trade, particularly in the movement of people and goods across the Green Line.

The World Bank's latest Macroeconomic Monitoring Report, titled "Translating Opportunities into Shared Prosperity," assesses the recent economic performance of the Turkish Cypriot community, revealing a significant recovery in 2023, with real GDP surpassing pre-pandemic levels. The report also provides policy recommendations to address longer-term challenges and capitalize on short-term opportunities for sustainable growth.

The economic rebound was bolstered by record high Green Line crossings and trade, particularly in the movement of people and goods across the Green Line. Notably, the labor market saw substantial gains in 2023, with over 9,600 new jobs created, of which forty-four percent were filled by women, marking a historic high in female employment. However, persistent challenges persist, including a high cost of living exacerbated by the depreciation of the Turkish lira and high inflation.

"Food inflation in the Turkish Cypriot economy is the highest among European economies, posing a significant risk to vulnerable populations struggling to make ends meet," remarked Goran Tinjic, World Bank Program Manager for Southern Europe.

Looking forward, the World Bank forecasts a moderation in GDP growth to 2.7 percent in 2024, reflecting both domestic vulnerabilities and external pressures. Despite this, the report underscores opportunities for sustainable growth through increased Green Line crossings, trade, and labor force participation, along with strategic investments in green and digital transitions.

The report advocates for robust policy responses to address structural challenges, including emergency support for the most vulnerable, strengthening energy security, advancing disaster risk management, promoting private sector competitiveness, and investing in human capital. Despite progress, Green Line trade remains below potential, requiring action to address longstanding bottlenecks.

This year's special issue of the report emphasizes evidence-based policymaking for shared prosperity, discussing how newly available datasets, such as the Household Budget Survey and Input/Output Tables, can inform better policy decisions. Natasha Rovo, World Bank Senior Economist and lead author of the report, highlighted the opportunities for intra-island trade to reduce production costs and foster knowledge exchange between Turkish Cypriot and Greek Cypriot communities.

In conclusion, the World Bank proposes a three-pronged approach to strengthen evidence-based policymaking: improving data collection practices, promoting data utilization for policymaking, and investing in data literacy.

About the Macroeconomic Monitoring Report:

The report, funded by the European Union, is prepared annually by the World Bank to analyze economic developments and outlook for the Turkish Cypriot economy. Its insights aim to assist local and international stakeholders in formulating policies to support economic convergence and integration in Cyprus.