【世界银行】土族塞人经济，2023年5月：在充满挑战的时代航行-财政政策是否有助于减少土族塞人的收入不平等_53页_2mb

Summary of the Turkish Cypriot Economy Report: Navigating Through Challenging Times

Core Content

This report from the World Bank provides an analysis of the recent economic developments and short-term outlook for the Turkish Cypriot Community (TCc) in 2022 and 2023, with a special focus on the role of fiscal policies in reducing income inequality. It highlights the impact of multiple crises, including the aftermath of the COVID-19 pandemic, the war in Ukraine, and the earthquakes in Türkiye and Syria, on the TCc economy.

Main Points

Economic Recovery and Challenges

• Recovery Amid Crises: Despite multiple shocks and structural issues, the TC economy consolidated its recovery from the pandemic in 2022, with GDP growth estimated at nearly 10%.
• High Inflation: Inflation peaked at 120.7% year-on-year in October 2022, driven by post-pandemic recovery, currency depreciation, and supply chain disruptions. It has slightly decelerated to 84.9% in February 2023 but remains among the highest in Europe.
• Impact on Vulnerable Households: Inflation disproportionately affects the poorest households, with core inflation increasing significantly since 2021.
• Trade and Crossings: 2022 saw record levels of Green Line (GL) crossings and trade, with GL trade reaching EUR14.8 million, surpassing pre-crisis levels. The top traded goods included construction materials, plastics, and fresh fish.
• Unbalanced External Structure: The TC economy relies heavily on imports, accounting for 43% of GDP (2010–2019), while exports represent only 3% of GDP, with Türkiye as the main market.
• Energy Crisis: The TC economy is highly dependent on imported fuels, with about 60% used in electricity generation. The energy crisis, worsened by the Ukraine war, has led to increased energy costs and current account deficits.
• Fiscal and Current Account Deficits: Public spending in 2022 reached TL 20 billion, with over 40% allocated to transfers and wages. Revenues, excluding grants, were around TL 18 billion, mainly from indirect taxes. The current account deficit remains elevated, especially without Turkish grants.

Fiscal Policy and Inequality

• Limited Impact on Inequality: Fiscal policies have only a moderate effect on reducing income inequality, with the Gini coefficient dropping from 0.445 to 0.361.
• Negative Impact on Poverty: Indirect taxes significantly increase poverty rates, pushing it from 21.8% to 25.5%. In contrast, in-kind transfers (health, education) have redistributive effects and reduce poverty.
• Distributional Effects: Households in the second decile and above are net payers, while the poorest 10% are net beneficiaries when in-kind transfers are included.
• Key Reforms: The report identifies five key reform priorities:
  • Continue emergency support for the poor and vulnerable.
  • Enhance energy security through renewable energy investments and efficiency improvements.
  • Strengthen resilience to natural disasters and climate change.
  • Promote competitiveness through structural reforms.
  • Recover human capital lost due to the pandemic.

Key Information

• Data Sources: The report uses data from the TCc Statistics Office, World Bank, and other local and international bodies.
• Fiscal Policies: The system is unable to significantly reduce poverty but has a moderate effect on inequality.
• External Risks: The TC economy faces high downside risks, primarily from external factors such as the prolonged war in Ukraine, trade disruptions, and continued inflation.
• Monetary Policy: The Turkish Lira (TL) has depreciated significantly, leading to higher inflation and increased exchange rate risks. Interest rates on TL loans are about four times the policy rate.
• Social Assistance: Social assistance (SA) expanded in 2022, with the amount of electricity consumption eligible for subsidies increasing threefold.
• Labor Market: The labor market has recovered to pre-pandemic levels, but women's employment remains low at 34%, and unemployment is still above 2019 levels.

Conclusion

The TCc economy has shown resilience in recovering from the pandemic and multiple crises, but faces persistent challenges such as high inflation, unbalanced trade, and financial vulnerabilities. While fiscal policies have a limited role in reducing inequality, they play a critical role in addressing poverty and supporting households during economic shocks. The report underscores the importance of structural reforms and macroeconomic stability to build long-term resilience and address the distributional impacts of fiscal policy.