Cyprus - Overview of economy

The division of Cyprus into 2 areas, controlled by Greek and Turkish authorities respectively, shapes the economic affairs and structure of the island. The economy of the Republic of Cyprus experienced rapid growth in the 1970s after the island's division into 2 zones. The government financed investment to replace housing for the Greek Cypriots who moved to the Greek zone after the division. That explains why the real gross domestic product (GDP) growth rates were over 6 percent annually in the 1980s. However, the GDP growth rate fell back to an average of 4.3 percent between 1994 and 1999.

Both the Greek and Turkish zones face severe water shortages. The island has no natural reservoir and experiences seasonal inequalities in rainfall. Although there is an aquifer (underground water supply) on the island, it is subject to seawater intrusion, which increases salt content, especially in the Turkish zone. Both administrations have sought ways to overcome the issue; several desalination (salt removal) plants are planned for construction in the near future.

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