Turkish Cypriot Economy : Looking Ahead to Steer the Economy Toward a Higher Growth Path
Following an unprecedented exchange-rate depreciation in 2018 that hammered both the Turkish and the Turkish Cypriot (TC) economies, the previous economic recovery in the TC economy collapsed. The fiscal deficit continued to shrink as the TC admini...
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| Language: | English |
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World Bank, Washington, DC
2020
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| Online Access: | http://documents.worldbank.org/curated/en/599481601014064286/Turkish-Cypriot-Economy-Looking-Ahead-to-Steer-the-Economy-Toward-a-Higher-Growth-Path-A-Macroeconomic-Monitoring-Note http://hdl.handle.net/10986/34532 |
| Summary: | Following an unprecedented exchange-rate
depreciation in 2018 that hammered both the Turkish and the
Turkish Cypriot (TC) economies, the previous economic
recovery in the TC economy collapsed. The fiscal deficit
continued to shrink as the TC administration reduced
expenditure due to declining budget support from Turkey.
Looking ahead and doing things differently will help break
this downward trend in income per capita and avoid widening
the gap between TC income per capita and the European Union
(EU). This will require investing more in higher-quality
physical assets by changing the business model both in the
public and private sectors; improving the quality of human
assets by addressing both the technical and socio-emotional
skills gaps, and inefficiencies in the education system;
improving labor force participation by facilitating access
to work opportunities for youth and women; and enhancing
firms’ productivity by upgrading the business environment
and reducing inefficient use of resources. Using the World
Bank long-term growth model, the simulations show that the
real income per capita of TC can double from between now and
2035 if investment in high-quality physical assets
increases. Setting the TC economy on a high growth path and
boosting its resilience to shocks will require reducing the
economy’s dependence on imported fuel and diversifying
toward renewable energy (RE). This macroeconomic monitoring
note is structured in two chapters. Chapter one discusses
recent economic developments and the short-term outlook,
lays out the challenges to long-term growth that hold back
income per-capita growth and presents policy recommendations
to break the trend so that the TC economy can double its
income per capita in the coming 15 years. Chapter two, the
special issue, discusses how the TC economy can strengthen
its resilience to help shield the economy from shocks,
protect the most vulnerable, and ensure that incomes can
rebound quickly. |
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