BRUSSELS, Dec. 19, 2024-The World Bank's latest series of reports on the Turkish Cypriot economy, released today, reveal a decline in living standards between 2014 and 2021 and lay out a pathway for reversing this trend, including through better data collection and fiscal reform. The reports recommend the Turkish Cypriot local bodies to align with EU practices by conducting living standard surveys every one to two years and a population census every ten years to enable more detailed, evidenced-based policy discussions and resource allocation, which are key to understanding and reducing poverty.
The reports, published under the "Supporting Economic Convergence and Integration in Cyprus" project, funded by the European Commission, highlight a rise in the poverty rate from 11.2 percent to 13.9 percent over the seven-year period, coupled with an increase in income inequality, as reflected in a rise in the Gini index from 34.4 to 36.8. The reports underscore the necessity of better data collection for addressing these challenges. The Household Budget Survey, the primary tool for monitoring socio-economic statistics in the Turkish Cypriot community, is conducted only every six to seven years due to financial constraints. The last census was conducted in 2011. This lack of current data restricts policymakers' capacity to respond to economic changes effectively and leaves vulnerable households more exposed to risks like rising prices and consumption patterns.
"The economic impact of the pandemic has been profound, with the heaviest burden falling on the elderly, individuals with lower levels of education, and urban communities," said Annely Koudstaal, World Bank Program Manager for Southern Europe. "While it is encouraging to see signs of recovery in 2022 and 2023, the lack of up-to-date household-level data makes it difficult to fully understand the current situation. Access to better and more timely data is critical for shaping fiscal policies that support the most vulnerable members of the community."
Fiscal policy interventions during the pandemic, such as emergency social assistance, provided limited relief to low-income households. The reports also highlight how fiscal policies and reforms can play a more decisive role in addressing poverty and inequality. Suggested measures include enhancing progressive taxation programs, expanding social assistance, and revising the design of value-added and personal income taxes to ensure a more equitable distribution of resources.
In addition, establishing an absolute poverty line, alongside a comprehensive poverty profile encompassing geographic and household characteristics, would support more precise targeting of assistance to those most in need. The current absence of a credible poverty line measure hampers policymakers' efforts to address the needs of the most impoverished communities.
These findings underscore the need for timely, data-driven policies and reforms to strengthen resilience, lay the groundwork for sustainable growth, and improve living standards for everyone in the Turkish Cypriot community.
About the World Bank Reports:
Living Standards Assessment for the Turkish Cypriot community
This report provides an in-depth analysis of poverty, inequality, and the socio-economic landscape of the Turkish Cypriot economy between 2014 and 2021. Using the Household Budget Surveys (HBS) conducted in 2014 and 2021, the report highlights key drivers of poverty and inequality.
Distributional Impact of Fiscal Policy in the Turkish Cypriot community
This report provides a detailed assessment of the Turkish Cypriot administration's fiscal policy structure, focusing on its distributional impacts on households. By examining taxation and social spending dynamics, the report identifies limitations within the current fiscal framework and proposes reforms to improve the effectiveness of redistributive policies.
Estimation of an absolute poverty line for the Turkish Cypriot economy
This report presents a proposal for defining a national poverty line in the Turkish Cypriot economy and policy considerations for how such a line should be used. It takes a cost of basic needs approach to define an absolute poverty line and compares poverty estimates from this method with a relative poverty approach using household income and expenditure data from the 2021/2022 Household Budget Survey.
About the World Bank:
The World Bank Group has a bold vision: to create a world free of poverty on a livable planet. In more than 100 countries, the World Bank Group provides financing, advice, and innovative solutions that improve lives by creating jobs, strengthening economic growth, and confronting the most urgent global development challenges. The World Bank Group is one of the largest sources of funding and knowledge for developing countries. It consists of the World Bank, including the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID).
