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minor fluctuations. By 1980 however, the tax burden had risen to the equivalent of
17% of GDP and three years later it had broken the 20% threshold, where it stayed
(see Figure 2.19). Longer term, the costs of restructuring were passed on to the
domestic tax payer.
Source: Rep. Of Cyprus. 1994. Historical Data on the Econony of Cyprus 1960-1991, pp. 41-42,143-144.
1974 appears to be a watershed in terms of the Republic's economic structure and
its foreign trade. As a consequence of the loss of key natural resources, the
economy rapidly modernised. In some ways we have a story that looks a little like
the Dutch disease 59
in reverse. The loss of natural resources in Cyprus seemed to
make industry more competitive. Following the loss of two thirds of its resources 60
the Greek-Cypriot economy relocated itself around the urban sector. In the period
immediately following those losses, the traditional sectors of the economy
(essentially the primary sector) experienced rapid and permanent decline (see
Figures 2.6, 2.8 & 2.17) while the secondary and tertiary sectors of the economy
59 The exploitation of natural resources (in the case of Holland, natural gas) precipitates the decline of
other industries as the new industry pays higher wages to attract staff, pushing up wages in other
sectors, and making them less competitive. See Corden, W.M. and Neary, J.P. 1982. "Booming Sector
and De-industrialisation in a Small Open Economy", in the Economic Journal, Vol. 92, pp. 825-848.
There are also foreign exchange and interest rate consequences (of the Dutch disease) which are not
relevant in the Cyprus case because of its statutory interest rate ceiling and the fact that its currency is
fixed (against a trade weighted basket of currencies) rather than floating.
60 Wilson R. 1992, Cyprus and the International Economy. Basingstoke: Macmillan, p.32.
97