A Cyprus reunification deal would generate a 20-billion-euro ($27.2 billion) peace dividend for the recession-hit island, according to a study released Thursday.

The study predicts an elusive UN-brokered peace deal would raise per capita incomes by approximately 12,000 euros, expand the size of the economy by around 20 billion euros and add an average 2.8 percentage points to real GDP growth every year for 20 years.

A deal would almost eliminate the per-capita income disparity between Turkish Cypriots and relatively more well off Greek Cypriots, said the study by local economists.

"In the past, the tendency has been to see the costs and benefits of a solution in a static way: There was an appreciation of the immediate costs, but there was little understanding of the dynamic benefits," said the "Cyprus Peace Dividend Revisited" report.

It was compiled by Cyprus-based economists Fiona Mullen, Alexander Apostolides and Mustafa Besim, and funded by Sweden, Denmark, Finland and Norway.

The research is based on agreement being achieved in 2016 for a bi-communal, bi-zonal federation with political equality, as outlined in a February 2014 joint declaration.

"Both sides of the island would benefit from a 'peace dividend' that will come from two sources: recurring benefits from opening up the Turkish market of 74 million people to Greek Cypriots and the European Union market of 500 million people to Turkish Cypriots."

The economists estimate that the all-island GDP at constant 2012 prices would rise from just under 20 billion euros in 2016 to just under 45 billion by 2035, compared with around 25 billion without a solution.

In their study, annual average growth rate is set at 4.5 percent over 20 years, compared with just 1.6 percent without a solution.

The island has been divided since 1974 when Turkey invaded and seized its northern third in response to an Athens-engineered coup in Nicosia to unite Cyprus with Greece.

Greek- and Turkish-Cypriot leaders vowed to seek an end to the island's four-decade division "as soon as possible," relaunching peace talks in February after a nearly two-year hiatus.

Washington is keen to see an end to the island's 40-year split, highlighted by last week'svisit by US Vice President Joe Biden.

The internationally recognised Republic of Cyprus is still reeling from the eurozone debt crisis, which forced it to secure an international bailout in March 2013 that exacerbated an already severe recession.

Biden highlighted the potential role Cyprus could play in the region, especially with its offshore gas reserves, whose exploitation for export to Europe has been hampered by the division.