The Turkish Cypriot economy showed significant growth in 2024, but inflation and fiscal pressures remain high, according to a new World Bank report. The report is part of the EU-funded Supporting Economic Convergence and Integration in Cyprus program, which provides recommendations for improving competitiveness and economic integration on the island.
The Macroeconomic Monitoring Report 2025: Beyond Bottlenecks – Fostering Economic Integration estimates that the economy grew by 6.4 percent last year, largely due to domestic consumption. Higher wages in both public and private sectors helped counteract inflation and increase spending. However, Green Line crossings—a measure of service demand—were stagnant, with intra-island commerce seeing a slight decline. Currently, Green Line trade makes up only 10 percent of external sales from the Turkish Cypriot community.
Looking forward, growth is expected to slow to around 4.2 percent due to softer demand and rising fiscal pressures. To maintain growth, policy priorities include enhancing spending efficiency, broadening the tax base, and improving social protection measures targeting. Structural reforms are essential for private sector development.
The report emphasizes unrealized potential for greater trade integration on the island. It suggests modernizing regulatory practices could lower consumer prices and enhance competitiveness by supporting businesses that drive growth.
Anna Akhalkatsi, World Bank Division Director for the European Union stated: “Products entering the Turkish Cypriot community cost more than in many other economies, and much of this is driven not by market forces but by regulatory distortions.” She added that reducing trade frictions could unlock opportunities for economic convergence across the island.
To foster economic integration and shared prosperity, recommendations include simplifying licensing requirements and replacing outdated systems with risk-based controls at entry points. Other suggestions involve piloting incentives for compliant traders, aligning standards, strengthening infrastructure, improving access to market information and finance, as well as reviewing taxation practices limiting intra-island trade flows.
The Macroeconomic Monitoring Report is funded by the European Union and prepared by the World Bank to analyze economic developments in the Turkish Cypriot economy. Its findings aim to guide stakeholders in formulating policies supporting economic convergence in Cyprus.
For more details on these findings or related projects managed by entities such as the World Bank or European Commission’s Aid Programme for Turkish Cypriots visit their respective websites listed within their descriptions.