PRIO: “Solution in Cyprus increases GDP per capita by €12,139” A study by PRIO reveals that solution in Cyprus would bring an extra GDP of €18.9 billion on averageby 2035

ANKARA – A recent study by Peace Research Institute Oslo (PRIO) estimates that a settlement in Cyprus would bring an additional GDP of € 18.9 billion and GDP per capita of €12,139 on average by 2035.

PRIO study titled “The Cyprus Peace Dividend Revisited: A productivity and Sectoral Approach” was presented with a meeting at TEPAV. Opening speeches were delivered by Güven Sak, TEPAV Managing Director and H.E. Janis Bjørn Kanavin, Ambassador of Kingdom of Norway to Turkey and the speakers of the meeting were Dr. Harry Tzimitras, Director of PRIO Cyprus Centre, and Assoc. Prof. Dr. Mustafa Besim, Faculty Member of Eastern Mediterranean University and coauthor of the study.

During his speech, TEPAV Director Sak drew attention to common perception among the Greek Cypriots that the process of convergence following a possible solution per se would imply certain costs.

Assoc. Prof. Dr. Mustafa Besim identified at the beginning of his presentation that growth was weak and volatile both in the South and the North of the island. Besim cited as key problem areas the bloated public service system and dependence on aids from Turkey in the North and the escalated post-crisis debt stock and the banking fragility in the South. Following the assessment of the current economic status, Besim gave information about the methodology and the findings of the study.

The study, in the light of the signing of a joint statement by Anastasiades and Eroğlu on 11 February 2014 and the resumption of the negotiations, assumes that a settlement for a federation is concluded by 2016 and the the overall governance structure on the island is enhanced via a bicommunal and bizonal federal solution. Under this framework, the study draws a three-stage timeline for the solution process:

• Stage 1: Signing of Cyprus settlement and a period of preparation (2016)
• Stage 2: Peak investment and sector-growth period (2018-2022)
• Stage 3: Normalization and convergence (2035)

The study investigates the peace dividend in two methods – total factor productivity and sector based approaches – and identifies that peace dividend builds upon the utilization of wider opportunities in tourism and construction sectors, creating a “Cyprus brand” to attract students for higher education, and easier access to new trading destinations via reduced transportation costs, Besim stated. In this context, Besim emphasized that the actual cost of conflict was severer than what is seen and that a possible solution would bring economic value added both to the North and the South. In the light of this framework, Besim stressed that peace could bring to Cyprus and extra GDP of €18.9 billion, extra GDP per capita of €12,139, and an extra annual GDP growth of 2.8 percentage points. Besim added that the GDP per capita in the North as percentage of South could increase from the current 50 percent to 90 percent by 2035.

Underlining that certain incentives would be needed to construct the will for solution at political and social level, Besim said that the emphasis should be put on the cost of conflict for both parties as well as on the mutual economic and social benefits of a solution.

The meeting continued with a question and answer session which focused on the political feasibility and the cost of a solution on the island and the assumptions of the study.

Please click here for the study “The Cyprus Peace Dividend Revisited: A productivity and Sectoral Approach”