The economy of the Turkish Cypriot North is dominated by the services sector including the public sector, trade, tourism and education, with smaller agriculture and light manufacturing sectors. The economy operates on a free-market basis, although it continues to be handicapped by the political isolation of Turkish Cypriots, the lack of private and governmental investment, high freight costs, and shortages of skilled labor. Despite these constraints, the Turkish Cypriot economy turned in an impressive performance in 2003 and 2004, with growth rates of 9.6% and 11.4%. Over the same period, per capita income almost doubled. This growth has been buoyed by the relative stability of the Turkish Lira and by a boom in the education and construction sectors. The most vital reason for the sudden increase of the per capita income of the Turkish Cypriot economy was the conditional “opening” of the borders. This event gave the Greek Cypriots the chance to visit the northern cite of Cyprus and see their homes and properties that were forced to abandon 33 years ago. By visiting the “other” cite the people were forced to pay entrance fees and car insurance, which contributed to a great degree in the improvement of the economy. The northern cite of the island has also been undeveloped and as a result most goods and services remained relatively cheap. This was appealing to the Greek Cypriots that spend a lot of money buying products from the Northern cite contributing greatly to the amazing increase of the per capita income by spending millions of pounds only in the first year.

Eventual adoption of the euro currency is required of all new countries joining the European Union, and the Cyprus government currently intends to adopt the currency on 1 January 2008.

The largest bank on the island is the Bank of Cyprus.