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World Bank Global Economic Prospects, January 2020 Report – Slow Growth, Policy Challenges

Auguste Tano Koumane, World Bank Turkey Director

Mr. Koumane, in his opening speech at the World Bank – TÜSİAD Conference, highlighted three main issues that concerns the World economy today:

  1. High Debt Accumulation: Low interest rate environment globally has led to a huge debt burden in countries especially in emerging markets and developing countries. Turkey was no exception. In 2014 corporate debt was 56% and today it increased to 75% in Turkey; highest in the world. Good news is public and household debt are quite low. Corporates themselves obviously cannot manage this debt alone. The financial system needs to allow for them to cope with this situation. Policies are needed for corporates to restructure and get out of such situations.
  1. Slowing Investments: We have a better picture in Turkey as compared to other emerging markets. 25% to GDP ratio is good. But for the last 2 years investments slowed. This is a concern. Turkey is expected to come back strong, but need policies that allow for FDI. And also need new financial instruments.
  1. Productivity: In Turkey, productivity was very good but it has been reduced over the last couple of years. Drivers of productivity has been adversely effected. Need to be improved.

Hope geopolitics and policy measures allow the investment environment to flourish.

Growth will be created largely by consumption but also by investments in 2020 and 2021.

The new economic program prepared by the Government was studied by the Worldbank and Worldbank thinks the program is right and if implemented, Turkey will grow well.


Ayhan Köse, Kalkınma Araştırmalar Grubu, Dünya Bankası

Slow Growth and Policy Challenges

Mr. Köse pointed out three issues in his speech:

  1. Health of the Global Economy: Not good.
  1. Major Risks: corona outbreak, sharper then expected slow down in developed economies. Lower than expected growth. Geopolitical risks, climate risks
  1. Policy issues:

2019 was not a good year for the global economy. We are close to 2008 crises levels.

Just last month, it was thought that recovery signals were coming. But then the corona virus hit. However even before that, we were expecting a very slow growth. US and Europe were expected to grow slow.

But we were expecting emerging markets and developing countries would increase in growth. But again, most of them will grow a bit, certainly not enough to recover.

Why thought EMDEs will grow better? 8 economies we expected to deliver high growth. Turkey, Saudi, Mexico, Argentina etc. The reason was, that they bottomed up last year.


  1. Spread of Corona Virus:

Measures are limited.

Financial markets underestimated this issue initially but now responding very wildly.

China’s portion in global output and global growth has increased substantially from 2003, when SARS broke out. That’s why this will now have a much bigger impact. So, if China even slows down 1%, the EMs will be impacted more than 4%. If China, US and Europe slow down, then EMs will even slow more.

  1. Financial Stress due to rising debt in EMs.

From 2002 to 2018, we have seen a huge increase of corporate debt in EMs. Especially in the last 10 years. But they were also growing up until 2010. Then the growth started slowing down. Now we observing the “coldest debt hangover”. As long as cost of debt was lower than the growth, that was OK. But this thought was not a good thinking.

It was evident that when an EM accumulated debt, it ended up with crises. Unless a country has a sustainable productivity growth, it is hard for it to overcome this situation.

So, in the next 10 years they expect a slower growth if the current status prolongue. May be a 4% average growth in EMDEs.


Countries need to be prepared for virus outbreaks. Plus other things, via good policies and their implementations.

Yazar: Barış Öney

Barış Öney
Barış Öney, yatırım öncesi ve sonrası yönetim, halka arz, şirket satınalmaları, CEO, CFO, yönetim kurulu üyesi, yatırım bankacısı, kurumsal finansman danışmanı, stratejik/uluslararası iş geliştirme yöneticisi, proje yöneticisi ve mühendis olarak 28 yılı aşkın tecrübeye sahiptir.


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