World Bank Vice President for Europe and Central Asia Anna Bjerde welcomed the positive growth of Turkey’s economy during the pandemic in 2020 but also warned against outcomes of the inflation trend from which the whole world has been suffering.
“2020 was a very difficult year for the whole world. We saw the deepest recession globally in 80 years. Very few countries survived without negative growth. Turkey is one of the very few countries that had small positive growth in 2020, which is very welcomed, and quite surprising,” she told Hürriyet Daily News in an interview after her discussions in Ankara with Turkish authorities.
2021 has been an incredible recovery period so far and Turkey has had a very strong first six months of this year, she said, noting that their projection for Turkey would end up probably over 8 percent growth in 2021.
The growth rebound in 2021 has been good in Turkey, as the region’s is about 5 to 5.6 percent on average, she added.
But the World Bank is very cautious about their forecasts because it is difficult to forecast during a period of uncertainty, Bjerde said, pointing at the risks of evaluation of COVID-19.
Inflation, pandemic risk for Turkey
She said Turkey has a good vaccination rate for the pandemic but also drew attention to the fact that the country’s trading partners have uncertainty because of the pandemic and this might negatively influence its growth ambitions.
“External demand is the main driver of growth in Turkey. If trading partners have difficulties because of COVID-19, not having a strong vaccination rate as Turkey, then the external demand may be impacted and the growth outlook in 2021 or 2022 may be impacted,” the bank official said.
Bjerde warned that the world has been struggling with inflation. “The big question is it transitory because of the big rebound and recovery after 2020, or is it a more long-term phenomenon.”
Turkey is included in these countries that the bank watches for inflation because the Turkish Lira is depreciating, and that leads to an increase in inflation, she said.
“We are concerned about inflation because, according to our experience, inflation hits the poor hardest. So, Turkey has done a lot in the previous decades to reduce poverty, but with COVID-19 and now with some of these economic parameters, particularly inflation, we would worry about poverty again,” Bjerde stated.
“We discussed here with our counterparts on how to make sure that the outlook of the economy is such that benefits with all population in an equitable and a fair way,” she added.
Development partners to provide $3.2 bln for climate-oriented projects
Bjerde said the development partners, Germany and France, along with her bank would mobilize $3.2 billion, a combination of loans and some amount of grants, for Turkey’s climate-oriented projects after a memorandum of understanding signed recently.
“What is next in terms of the memorandum of understanding [MoU] implementation is that Turkey will now look at its Nationally Determined Contribution [NDC] and look at revising its ambition level. Right now, the NDC for Turkey has a commitment to reduce its emission by 21 percent by 2030. Under this MoU, Turkey will revisit its NDC and increase its ambition level,” she said.
Also after Turkey defines its long-term strategy under the Paris Climate agreement, they can help finance priority projects under these new plans to reach a much better position on the climate issue, Bjerde said.
The bank has already been doing a lot of climate-oriented projects in Turkey. In fact, in the last three years, this portfolio averaged 50 percent climate-focused operation.
The MoU is very timely because it comes as Turkey has ratified the Paris Agreement, she noted.
“The ratification coupled with an announcement to go net-zero emission by 2053 allowed us, the development partners, the World Bank, the government of Germany, the government of France, but also I see the IFC, EBRD and the U.N., to mobilize around this MoU to help Turkey to step up its ambition level,” Bjerde stated.
She detailed the future climate-oriented projects to be supported with this new fund.
Recalling that Turkey has concerns about water scarcity, the official said the bank would like to help Turkey efficiently manage its water resources by reducing wastewater, where it is possible with more efficiency, but also letting something new; re-use treated water for irrigation.
“Another area what we have started discussing here is what we can do to help on more decarbonization in the transport sector. Turkey has a lot of interest in what we call “e-mobility.” This is going with much lower carbon solutions for vehicles, but also utilizing public transport and railways are much more efficient,” she said.
The most significant, but also the most challenging part, is energy transition, she noted.
“The challenging part is the process of phasing out coal because Turkey is import-dependent on energy. Some of the coal is imported some of the coal is domestically produced. The transition from coal is possible, but it needs to be a just transition. With the job losses, with the changes in the dynamic in the towns and the regions that have coal, you need a plan so that you create new jobs, new sources of growth and revitalize the regions with other economic activities that dominate coal.”
The bank also sees private sector interest in the geothermal sector where they are already providing support, she said.
They are about to provide additional financing as the private sector does some of the explorations of the geothermal energy and develop it, while the bank provides mechanisms for risk-sharing.
In more traditional renewable energy, whether in solar, or wind, the private sector can do that with, again, some guaranties, Bjerde said.
Bank offers financial support for vaccination
The World Bank has been supporting Turkey on many issues including refugees, education, and the health sector. During the pandemic, they have supported the health service of Turkey with the necessary equipment and now the bank offers to financially support the country for its vaccination program for booster jabs.
“We have started to discuss with the authorities here whether there is a need to help in vaccination. We think this unfortunate pandemic is here with us for a bit longer and it will be good to be prepared. We have also offered our support to help with some type of vaccination project that we can finance,” she stated.