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The Greek Cypriot economy is
prosperous but highly
susceptible to external shocks. Erratic growth rates over the past decade reflect the
economy's vulnerability to swings in
tourist
arrivals, caused by political instability in the region and
fluctuations in economic conditions in Western
Europe.
Economic
policy is focused on meeting the
criteria for admission to the EU. EU-driven tax reforms in 2003
have introduced fiscal imbalances,
which,
coupled with a sluggish tourism sector, have resulted in growing fiscal deficits.
As in the
Turkish sector,
water shortages are a perennial problem; a few desalination plants are now on-line.
After 10
years of drought, the country received
substantial rainfall from 2001-03, alleviating immediate concerns. The
Turkish Cypriot economy has roughly one-third of the per
capita GDP of the south. Because it is recognized
only by
Turkey, it has had much difficulty arranging foreign financing and
investment. It remains heavily
dependent on agriculture
and government service, which together employ about half of the work force.
To compensate for the economy's
weakness, Turkey provides grants and loans to support economic
development.
Ankara provided $200 million in 2002 and pledged
$450 million for the 2003-05 period. Future
events throughout the island will be
highly influenced by the outcome of
negotiations on the UN-sponsored
agreement to unite the Greek and Turkish areas. |
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