The economic situation in the TRNC
Results of the economic development of the TRNC in 2005 showed an improvement of economic situation. Official statistics shows a steady increase in the unrecognized republic economy. However, this figure is not fixed and determined by the current situation. The turning point in the economy of the TRNC was in 2004, shows the trend of development, comparable to the dynamics of the economy and oil-producing countries of the industrialized nations. At the core of economic activity in the TRNC is the development of the construction sector, which led to a jump in GDP growth. Currently, the real estate market has entered a stage of saturation, which in turn led to falling demand and a trend toward slower growth TRNC.
In 2005, the economy grew by 10.6%. The relative freedom of movement on the island and the measures imposed by the European Union and the Government of the Republic of Cyprus, has a positive impact on the Turkish Cypriot economy. Maintaining the rate of growth of GDP at the current level can potentially lead to the equalization of levels of economic development of Turkish Cypriot and Greek Cypriot parts of the island.
In April 2005 a new coalition Government of the TRNC. The main economic goal of the new cabinet is to achieve a level of economic development, commensurate with the Greek Cypriot community and enabling integration into the European community. At the same time, the Government has not been able to identify with the strategy of economic development. The reason for this were the differences between the two parties forming the coalition government, which led to the freezing of many projects and uncertainty of prospects for the development of basic industries.
On average, GDP growth in the 1977-2004 biennium. amounted to 3.6%. In 2005, the gross domestic product has reached 1 billion 992 million U.S. dollars.
Financial assistance to the TRNC by Turkey in 2005 was 328 million U.S. dollars. Help Turkey allocated as follows (millions of U.S. dollars):
-58 – to the leadership of the Force to ensure the safety and maintenance of the TRNC Ministry of Civil Defense;
-5,9 – for the cost of energy 11 AK VS Turkey;
-109,6 – on infrastructure projects;
-59.7 – at the expense of infrastructure projects in 2004;
-93.5 – identified as a credit on account of unspent funds in 2004.
Fig. 1. The share of economic sectors in the production of GDP (%)
Turkey’s budget for 2006 allocated 618 million U.S. dollars to help the TRNC, of which 203 million will be used to develop 570 different infrastructure projects, 385 thousand – to improve radio and television, 1.8 million – the introduction of automation systems in the public sector, 6 million – for the development of higher education, 7.7 million – to build a hospital in Famagusta.
A plan provides a significant reduction in the economy according to the TRNC from the proceeds from Turkey. This will focus on attracting foreign investment and create self-sufficient economy of TRNC.
In 2005, the deficit of foreign trade reached 47.13% and the GDP amounted to 691 million U.S. dollars, which is 30% more than in 2004, the total export volume amounted to 52 900 thousand U.S. dollars, import – 744 million U.S. dollars. Major Imports of cars – 120 million U.S. dollars, an increase of 33% more than in 2004, then followed by cement, fuel, steel structures, industrial equipment.
A country’s trade deficit is covered mainly by income from tourism, teaching foreign students, foreign investment income of Turkish Cypriots working in the south of the island. Foreign financial aid significantly improves the performance invisible balance of foreign trade and is about 8% of GDP.
In general, the dynamics and range of imports reflect the main economic developments in the TRNC. The tendency toward lower activity in the real estate sector, which has led to a decline in sales of land.
The main foreign trade partner of the TRNC is a turkey. Imports from Turkey is 63.9% of the countries – EU members – 22.6%, from the Asian States – 7.5%, from European countries – not members of the EU – 2.4%. Exports to Turkey, the TRNC is 50.4, in the EU – 26.1 in European countries are not EU members – 13.3%, in the Middle East – 8.9%.
Despite the failure of the TRNC world community and economic isolation of the occupied part of the island’s foreign trade is conducted with virtually no restrictions. Delivery is carried out by ships in the port of Famagusta, but assuming that this is not a regular flight, a single transaction. Containers are delivered to the TRNC to the Turkish port of Mersin, are transferred to small vessels and sent to the ports of Kyrenia and Famagusta. The contracts for the supply as the place of delivery indicated Famagusta. In the case of lifting the embargo container not podesheveyut derivative works to continue, because the transport through the port of Limassol economically inefficient. Currently, the Turkish Cypriots do not have serious difficulties and shortages of goods because of restrictions on foreign trade.
TRNC economy is growing rapidly, but not enough to overcome the imbalance in the southern part. TRNC government determined that the foundation for future growth should be the development of public programs of construction and manufacturing.
On the prospects of development of the TRNC economy affect the following factors:
-uncertain timing of settlement of the Cyprus problem;
-international isolation of northern Cyprus, which determines the growing public debt;
-the need for a radical overhaul of the economic system based on the public sector.
However, the economy has considerable potential for development. Removing economic isolation could have a positive impact on economic growth, but in addition to the TRNC there is untapped potential for growth based on improved economic policies of the Government, which is sufficient to achieve the level of economic development that is consistent with EU standards and comparable with the level of the Republic of Cyprus. The development of the TRNC economy, it is important to the health situation on the island.
In order to realize the existing potential future plans the Government envisaged the implementation of economic reforms on several fronts. The major successes include the stabilization of the financial policy of course the Turkish lira and the reduction of lending rates. This would greatly improve the situation in the state budget, to liberalize the capital market and develop the functioning of banks after the crisis of 2001, these trends suggest the possibility of stable growth in the short term and contribute to the preparation of the TRNC economy to shift to the euro. The structural reforms undertaken in the private and public sectors, have long-term prospects and the need for better coordination. There is a need to develop an integrated strategy. At the same time, the lack of government development program makes it impossible to define the long-term prospects for the development of the TRNC economy.
In general, in the short term economic situation of the TRNC will largely depend on the progress and results of inter-communal talks on the Cyprus settlement and the entry of Turkey into the EU.
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