Economic Growth or Stagnation during the Interwar Period: Reconstruction of Cypriot GDP 1921-1938

This paper explores the macro-economic history of Cyprus in the inter-war period. It constructs the first detailed estimates of output at aggregate and sector levels, enabling the analysis of economic growth and the sectoral structure of the island’s economy. It evaluates its performance within the context of economic change on Europe’s South Eastern periphery and, specifically, in light of the experience of British colonial rule. The thesis argues, first, that economic growth was slow in wider European comparison and as sluggish as in neighbouring countries. It was so despite the island being far less exposed to the political upheavals of the First World War than most other economies in South Eastern Europe. Cyprus experienced a prolonged agricultural crisis, but participated in the post-depression recovery through the growth in international demand for the output of its copper mining industry. The colonial government remained committed to balanced budgets and non-intervention in the economy, limiting their ability to combat the effects of the great depression. As a result, the deteriorating economic situation increased the political tension between the islanders and the colonial government. The reluctance to mount an effective policy response to the great depression acted as a catalyst to political polarization, leading to violence and the suspension of the island’s constitution.