North Cyprus State Planning Organisation (SPO) 
Economic Developments in North Cyprus:

 [General] [GNP] [Investment] [Prices] [Employement
[Public Finance] [Foreign Trade] [Balance of Payments
[Economic Sectors] [Conclusion]

  I. General

North Cyprus State Planning OrganisationThe main objective of the development policy in the Turkish Republic of Northern Cyprus are to secure the achievement of the highest possible rate of growth compatible with the maintenance of economic stability; the improvement of the balance of payments; more equitable distribution of the economic burdens and the National Income; the general improvement of the standards of living and the further expansion and improvement of social services.

For the realization of these objectives, long-term plans and annual programmes have been prepared and put into action since 1977 which marked the beginning of the Planning Period.

The Third Five Year Development Plan (1993-1997) which is in action, basically aims the improvement of the liberal economic system; reduction in the rate of growth of consumption expenditures and increase in domestic savings; encouragement and enhancement of investments in priority sectors, especially in tourism and industry; increase in export-oriented production and thus increase in exports; improvement and expansion of the finance sector and social services.

In accordance with the liberal economic policy adopted by the government of the TRNC, trade, tourism, banking, education, transportation and industrial sectors preserved their priority and importance.

For the assessment of the economic performance in the TRNC, the following economic indicators are worth examining.


 [General] [GNP] [Investment] [Prices] [Employement
[Public Finance] [Foreign Trade] [Balance of Payments
[Economic Sectors] [Conclusion]

  II. Growth Rate of Gross National Product (GNP) 
During the period of 1977-1993 Gross National Product has increased by 98.1% at constant prices of 1977. The GNP which was 3,810.5 million TL in 1977 rose to 7,547.4 million TL in 1993 at constant prices of 1977 which accounted for 6,941,224.3 million TL at current prices and 624.9 million at US dollar basis.
  Per Capita GNP 
During the period of 1977-1993, GNP per capita has increased by 62.2% at constant prices of 1977. The GNP per capita, which was 26,279 TL in 1977 rose to 42,612 TL in 1993 at constant prices of 1977, and 39,189,387 TL at current prices of 1993 which represents 3,528.4 US dollars. 

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  III. Fixed Capital Investments 

For the realization of the growth rate targets set in the long-term plans and annual programmes, Turkish Republic of Northern Cyprus was badly in need of financial aid for certain giant infrastructural projects such as the construction of the airports, sea ports, dams, derivation canals, highways, and power plants and the improvements of the telecommunication systems and they were all financed by the Republic of Turkey. The fixed capital investments which were realized as 524.6 million TL in 1977 reached 14,198.4 million TL at constant prices of 1977 and 2,527,820.9 million TL at current prices, in 1993 (cumulative).

At the beginning of the planning period, the share of the public sector in the fixed capital investments was much higher than the share of the private sector. But through the years of intensive public investments, most of the infrastructural projets were completed and some of them are about to be comp leted soon. Hence, in recent years the share of the private sector began to rise. The shares of the public and the private sectors in the total fixed capital investments of 1993 reached 38.8% and 61.2% respectively.


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  IV. Price Trends 

Looking at the price trends in the TRNC, changes in the Consumer Price Indi ces show that a high rate of inflation has been prevailing in the TRNC. Although it went up as high as 92.97% in 1980 it declined in the subsequent years. But, these positive developments were deteriorated in 1984 when the Consumer Price Index growth rate rose again to the level of 70.72%. During the period of 1985-87 it prevailed between 40-48% but in 1988 the inflation began soaring again and it reached 62.57%. The following figures show the CPI and yearly changes in the CPI for the years 1979-1993.

Year CPI  (Dec.1978=100) Change in CPI, %
1979 177.66  77.66
1980 342.83 92.97
1981 489.71 42.84
1982 652.28  33.20
1983 872.93 33.83
1984 1,490.29 70.72
1985 2,131.64 43.04
1986 3,156.68 48.09
1987 4,514.26 43.01
1988 7,338.83 62.57
1989 11,141.19 51.81
1990 18,874.57 69.41
1991 27,619.60 46.33
1992 45,122.29 63.37
1993 72,718.86  61.16

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  V. Employment 

The employment policy aims at attaining full employment and the systematic promotion of schemes for the training and re-training of the labour force for increasing productivity and eventually the most efficient utilisation of the manpower.

There is not any acute unemployment problem in the TRNC because the official registers of unemployment shown a constant decline over the years. Within this context the average number of unemployed dropped from 1,337 in 1977 to 569 in 1993 and eventually the unemployment ratio which was 2.9% in 1977 dropped to 0.8% in 1993.

During the period of 1977-1993 the working population has increased by 68.3 per cent. The working population which was 44,795 in 1977 rose to 75,387 in 1993. During this period, 30,583 people were employed in the economy but they were mostly employed in the services sector and consequently lack of productivity and disguised unemployment were the two important questions re quiring solution.

The working population constituted 42.6 per cent of the total population which reached 177,120 in 1993. 


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  VI. Public Finance 

The basic aim of the fiscal policy in the Turkish Republic of Northern Cyprus is the creation of the necessary conditions for internal monetary stability supporting the more productive infrastructural projects, reducing the depen dence of foreign loans needed to finance the budget deficits and limiting the rate of growth of personnel expenditures, transfers and subvention.

The total local revenues which is composed of tax revenues, non-tax revenues, factor incomes and the social funds, showed an ascending tendency during the period 1988-90. But in 1991 the local revenues dropped to US$ 124.3 million and in 1993 rose again to the level of US$ 152.1 million.

  Bank Deposits 

The Turkish Lira (TL) deposits increased from 121,644.1 million TL in 1988 to 2,975,223.9 million TL in 1993. The increase in the amount of deposits at dollar basis was 213% and this was due to the rise of interest rates which attracted more deposits and diverted sight deposits to time deposits.

The foreign currency deposits which were US$ 83.5 million in 1988 increased 174.3% and reached to US$ 229 million in 1993.


 [General] [GNP] [Investment] [Prices] [Employement
[Public Finance] [Foreign Trade] [Balance of Payments
[Economic Sectors] [Conclusion]

  VII. Foreign Trade 

The economy of the Turkish Republic of Northern Cyprus has the characteristics of an island economy with limited resources. During the period of 1977-1993 there was an increase in the volume of the foreign trade. The volume of foreign trade which was US$ 105.9 million in 1977 rose to US$ 418.4 million in 1993.

During this period, the imports of the TRNC increased from US$ 82.0 million in 1977 to US$ 363.9 million in 1993, while the exports rose from US$ 23.9 million in 1977 to US$ 54.5 million in 1993. Thus, the imports increased by 343.8%, and the foreign trade deficit, which was US$ 58.1 million in 1977, reached US$ 309.4 million in 1993.

Export earnings met 29.1% of the imports of the total imports in 1977, 36.6% in 1978, 43.4% in 1979 and 50.1% in 1980. These favourable developments did not continue in the subsequent years and this fluctuated below 50% dropping finally to 15% in 1993.

TRNC has adopted a liberal trade policy and practices no discrimination against any foreign country. She has succeeded in establishing trade relations with more than 60 countries all over the world.

At the beginning, foreign trade relations were carried out to a greater extent with Turkey and United Kingdom but in recent years relations with other EU and Far Eastern countries developed greatly.

agricultural and industrial products including processed agricultural goods are worth mentioning in the overall exports of the Turkish Republic of Northern Cyprus. the share of the agricultural products which accounted for 77.5% of the total exports in 1977 dropped to around 44.6% in 1993.

The main agricultural and industrial products (including agricultural based) processed goods exported from TRNC can be seen from the the following items:

Live lambs & kids Olives and olive oil
Dairy products Refreshments
Citrus crops Hides and leather
Grapes Wool
Citrus animal fodder Gypsum
Concentrated citrus PVC Band (selotape)
Fresh vegetables Craft linear paper
Potatoes Kitchen utensils (Tephlon)
Carob seeds Ready-made clothes
Kibbled carobs Welding electrode
Tobacco Other items

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  IIX. Balance of Payments 

During the period of 1988-1993 positive developments occured in the balance of payments of the TRNC. The current account deficit dropped from 8.8 million US dollars to 1 million US dollar in 1993. The main factor which led to this positive development was to increase in the net tourism revenues during this period.


During the period of 1988-1993 the exports realized showed an annual average increase of 0.8% while the imports realized showed an increase of 10.8%. As a result of this, the average annual increase in the foreign trade deficit was 13.3%. Exports increased from 52.4 million US dollars in 1988 to 54.5 million US dollars in 1993 while imports increased from 218.1 million US dollars in 1988 to 363.9 US dollars during the same period and consequently the foreign trade deficit increased from 165.7 million US dollars in 1988 to 309.4 million dollars in 1993.


The category of invisibles, the net tourism revenues rose from $118 mn in 1988 to $224.6 mn in 1993. This development corresponded to an annual rise of 13.7% in the average which is a good performance. The expenditure incurred by the Turkish Peace Force, the income from the Free Port and Zone, net factor income from abroad (receipts and payments arising from salaries, wages, rents and interest), edicational income and expenditure are shown under the item of Other Invisibles (net). The other invisibles, excluding tourism, increased from $38.9 mn in 1988 to $83.8 mn in 1993 by an average annual increase of 16.6%.

These positive developments in the invisible items caused the surplus in the invisible balance to rise from $156.9 mn in 1988 to $308.4 mn in 1993 by an average annual rise of 14.5%. 

Consequently, the current account deficit decreased from $8.8 mn in 1988 to $1 mn in 1993.


The capital movements in the TRNC's Balance of Payments have, except foreign aid provided for long term investments, a short term characteristic. Credits from the Republic of Turkey, as well as part of the foreign aid, being of a short term nature, are used for current expenditure. The movements of capital required for imports realized with foreign exchange rates, as well as the other capital movements constituting a "contra" to this, have by reason of their use, the characteristic of short term capital movements.


    During the 1988-1993 period, the foreign aid and loans showed an ascending tendency by increasing from $16.7 mn in 1988 to $31.6 mn in 1993.


    In the TRNC, financing of imports by waiver as against official allocation means imports realized with foreign exchange at Banks exchange rates. As such imports do not make use of the State's exchange reserves, they are
    considered by the State as imports by waiver as against official allocation. The capital accumulating in Turkish Liras in the free market are used for financing imports realized with foreign exchange at Banks exchange rates. The other short term capital movements have increased during the 1988-1993 period from $61.9 mn in 1988 to $160.7 mn in 1993 by an average annual increase of 21%. In conclusion, Capital Movements Balance increased from $38.2 mn in 1988 to $62.6 mn in 1993.

    As a result of the above economic developments, the overall balance of foreign payments increased from $29.4 mn in 1988 to $61.6 mn in 1993 by an average annual increase of 15.9%.


 [General] [GNP] [Investment] [Prices] [Employement
[Public Finance] [Foreign Trade] [Balance of Payments
[Economic Sectors] [Conclusion]

  IX. Main Economic Sectors 


    The agricultural sector is the backbone of the economy in the TRNC. Although its share in the GDP id decreasing from year to year it is still of major importance especially as far as its contribution to GDP, employment, exports and supply of raw materials to industry are concerned.

    The contribution of the agricultural sector to the GDP increased from TL619.3 mn in 1977 to TL891.1 mn in 1993 with an increase of 43.9% at constant prices of 1977. The export of the agricultural products accounted for 44.6% of the total domestic exports and 24% of the working population was employed in the agricultural sector in 1993.

    Owing to the unfavourable climatic conditions prevailing in the TRNC and in conjunction with the importance attached to the agricultural sector, a considerable amount of subsidies have been paid over the years to alleviate the losses incurred in this sector.


    The manufacturing industry achieved one of the highest rates of growth during 1977-1993 period. The value added of the sector increased from TL317 mn in 1977 to TL794.4 mn in 1993 with an increase of 150.4% at constant prices of 1977.

    The share of the sector in the GDP increased from 8.4% in 1977 to 10.7% in 1993 and the export of the industrial products accounted for 55% of the total domestic exports. From the year 1974 to the year 1993, the number of production units increased from 230 to 741 and the number of personnel employed in these units increased from 2,148 to 12,784.


    Tourism will continue to be a basic priority sector and one of the main factors of economic development in the TRNC. In parallel to the economic development programme adopted by the TRNC, the tourism sector has been singled out as the most important sector for the improvement of the economy, and the government is determined to provide all the necessary incentives for the prospective investors in the tourism sector. In line with this determination, an act was passed by the Republican Assembly of the TRNC containing a wide range of incentives for the prospective investors. These incentives are as follows:

      a) Import duty exemptions for investment goods concerning the project;

      b) Government contribution to charter-risk;

      c) Contribution to brochure and advertisement expenditures, up to 75% depending on the number of bed-nights realised;

      d) Exemption from income tax and corporate tax for a period of 10 years in case of investment in tourist accommodation units, and/or operating charter flights;

      e) For public companies of which the number of shareholders is not less than 50, the exemption period noted above is increased by an additional three years;

      f) Annual interest and principal installments of foreign loans enjoy a transfer guarantee;

      g) Tourism establishment of hotels and travel agencies, may each year deduct 20% of taxable income;

      h) Repatriation of profit without any restriction or limitation

      i) Free transfer of proceeds in case of liquidation of investment

      j) Employment of foreign qualified personnel who are not available

      k) Transfer of net income earned by foreign personnel is free

      l) Exemption from construction licence fee;

      m) All travel expenses related to promotion and marketing; and

      n) All kinds of advertisement, promotion and marketing expenses are
      also deductable from the taxable income.

The bed capacity in the TRNC has increased from 2,952 in 1975 to 7,462 in 1993. The number of tourists who visited the TRNC and the net tourism revenues during the period between 1977-1993 can be seen in the table below:

  Tourist Arrivals

Net Revenue

Year From Turkey From Other Total (mn US$)
1977 84,779 10,160 94,939 30.2
1978 104,738 8,172 112,910 33.5
1979 95,115 13,286 108,401 33.7
1980 69,808 14,703 84,511 24.0
1981 62,660 15,474 78,134 23.9
1982 65,018  22,611 87,629 27.2
1983 78,649 20,285 98,934 37.1
1984 93,413 19,905 113,318 40.3
1985 103,791 21,284 125,075 47.3
1986 105,200 25,632 130,832 52.0
1987 147,965 36,372 183,337 103.5
1988 173,351 56,050 229,401 118.0
1989 214,566 59,507 274,073 154.9
1990 243,269 57,541 300,810 224.8
1991 179,379 40,858 220,237 153.6
1992 210,178 57,440 267,618 175,1
1993 281,370 77,943 359,313  224.6

Source: State Planning Organization. 

As it can be seen from the above table,  there are increases in the number of tourists from countries other than Turkey and the increase in tourism revenues seems favourable for the attainment of the specified tourism policy.

Although we have modern airports of Ercan and Gecitkale, it cannot be said that all our problems in air transport have been settled. In spite of the problems faced, TRNC maintains air link with the outside world via Turkey by public and private airline companies. 


 [General] [GNP] [Investment] [Prices] [Employement
[Public Finance] [Foreign Trade] [Balance of Payments
[Economic Sectors] [Conclusion]

  X. Conclusion 
  In conclusion it can be easily seen that the economic trend in the Turkish Republic of Northern Cyprus has been demonstrating a gradual but continuous growth and improvement since 1977. In spite of high rate of inflation and economic and political difficulties and many deprivations, the realisation of 4.4% annual average rate of growth should be assessed as a significant achievement. 
  TRNC State Planning Organization, Nicosia, December 1994