The growth of two small economies in the Great Depression: GDP estimation for Cyprus and Malta during the interwar period (1921-1938)

This article presents the major results of the first attempt to create historical national accounts for Cyprus and Malta. It constructs the first detailed estimates of output at aggregate and sector levels, enabling the analysis of economic growth and tracing structural change. The islands’ performance is evaluated within the context of wider economic change in Europe’s South Eastern periphery, suggesting that their economic growth was slow in comparison, despite both Cyprus and Malta being far less exposed to the political upheavals of the First World War. However, the ultimate reasons for their comparatively weak growth performance differed: Cyprus experienced a prolonged agricultural crisis, but participated in the post-depression recovery through the rapid expansion of the copper mining industry. Malta’s growth was slower than Cyprus due to the combination of declining British military expenditure and accelerated demographic growth. These differences notwithstanding, the islands were ultimately affected by common problems. Their small overall size had a negative effect on their performance as global protectionism increased and restricted export opportunities. An important negative determinant for growth during the interwar period was their size, which in combination with the islands’ status as British colonies, made autarkic policies prohibitive.