Between 1963 and 1974, the economy of the Turkish Cypriot community was that of an underdeveloped society. Much of this backwardness resulted from the economic blockade imposed by Greek Cypriots on the Turkish Cypriot enclaves, which largely cut them off from the outside world. The geographical separation of the enclaves from one another only worsened their plight. In addition to external obstacles, Turkish Cypriots were not a notably commercial people or much involved in the island's limited manufacturing sector. Most Turkish Cypriots earned their livelihood from farming or government employment. By the early 1970s, Turkish Cypriots accounted for only 6 percent of the island's gross domestic product (GDP--see Glossary), although they constituted about 20 percent of its population.

The harsh economic conditions began to change after the Turkish intervention of 1974 and the subsequent de facto partition of Cyprus. The Turkish Cypriots formed their own "state" in 1975, and in 1983 declared the area they occupied in northern Cyprus to be the "Turkish Republic of Northern Cyprus" ("TRNC"). Once they had their own contiguous territory and government, Turkish Cypriots began to work toward economic development. Their efforts were aided by significant financial and technical assistance from Turkey and an influx of workers from that country. Some of these workers came as settlers. Others were Turkish Cypriots who had left the island during the violent and uncertain 1963-74 period.

The Turkish Cypriots had some success in fashioning a working economy. The GDP of the "TRNC" nearly doubled in real terms between 1977 and 1990 (see table 17, Appendix). According to Turkish Cypriot statistics, the GDP of the "TRNC" grew at an average annual rate of 6.4 percent between 1977 and 1988. The rate of growth was 7.5 percent in 1988 and 7.1 percent in 1989, and similar growth was expected in 1990.

In addition to healthy growth rates, the economy was becoming more modern in structure. In 1989 industry's share of GDP was 14 percent and surpassed for the first time agriculture's share of 10.9 percent (see table 18, Appendix). Services represented nearly half of GDP, although an unhealthy proportion of this share stemmed from government services and employment.

Turkish Cypriots still lagged far behind Greek Cypriots economically. For example, per capita income increased from US$586 in 1974 to US$2,245 in 1989, but was only a third of the level achieved in the Republic of Cyprus. Turkish Cypriots often contended that many of their economic difficulties stemmed from the Greek Cypriot effort to impose an economic blockade, cutting them off from the rest of the world except Turkey. There was another cause of difficulties: because the "TRNC" was recognized only by Turkey, most international economic assistance to Cyprus from international organizations such as the World Bank (see Glossa28c sary) and the European Community (EC--see Glossary) went to the Republic of Cyprus. In short, although the Turkish Cypriots had achieved a measure of political independence and economic success, by late 1990 the "TRNC" still lacked the external recognition necessary for greater economic development.

Data as of January 1991