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Turkey’s Rail Connectivity and Logistics will Improve with World Bank Financing

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The World Bank’s Board of Executive Directors today approved a loan in the amount of EUR 314.5 million ($350 million equivalent) for the Turkey Rail Logistics Improvement Project. The project aims to reduce transport costs in selected rail freight corridors and to strengthen institutional capacity at the Turkish Ministry of Transport and Infrastructure (MoTI) to deliver rail freight connectivity and manage rail-enabled logistics centers.

The project will support delivery of last-mile rail and multimodal connectivity infrastructure at well-prioritized nodes of Turkey’s national railway network. These interventions will help revitalize the transport and logistics sector, and by extension, contribute to the sustainability of the cargo owners operating supply-chains in the project’s target corridors in the aftermath of the COVID-19 pandemic.

“Despite having economic geography and commodity specialization characteristics that are in-principle favorable to the use of rail freight, rail accounts for only 4% of Turkey’s transported tonnage, leaving a large share of freight to be moved by road. This leaves significant economic value on the table in terms of avoidable logistics costs and environmental externalities,” says Auguste Kouame, World Bank Country Director for Turkey. “The project’s investments will contribute towards more fully realizing rail freight’s potential in Turkey.”

The project will be implemented by the Ministry of Transport and Infrastructure’s (MoTI), and has three components:

Component 1 includes construction of railway branch lines and multimodal connections at priority network nodes, including Filyos Port, Çukurova Region Industrial Zones, Iskenderun Bay Maritime Ports, and at additional priority sites to be selected during implementation;

Component 2 includes feasibility studies, detailed engineering designs, environmental and social documentation, and construction supervision for rail last-mile connectivity infrastructure at additional freight nodes;

Component 3 focuses on Phase 2 COVID-19 response support, institutional strengthening, capacity building, and project implementation support, including technical assistance on uniformization of rail technical standards across the national rail network, support in preparation of a strategy document for rail freight sector performance improvement, and support to Turkish State Railways through development of an operational and management model for rail-enabled logistics centers.

“Strengthened management and decision-making capacity at MoTI to promote multimodality, expand the use of rail freight, and improve the quality of rail freight services nationally will be the other benefits,” remarked Murad Gürmeriç and Luis Blancas, Task Team Leaders of the Project. “The project is expected to reduce transport costs, reduce emissions of greenhouse gases (GHGs) and local pollutants, and increased share of rail in the freight transport task of the corridors targeted by the project.”

The project is aligned with Turkey’s Country Partnership Framework (CPF) for FY18-FY21, which focuses on the three strategic objectives of growth, inclusion, and sustainability.The project will contribute to the growth focus area which has the objective of enhancing the competitiveness of selected industries. The project is also aligned with the WBG approach to supporting client countries in mitigating the impact of COVID-19 on their economies, firms and workers.

The impact assessment envisioned in Component 3 of this project will help mitigate the impacts of COVID-19 by supporting MoTI in diagnosing the medium- and long-term impacts of COVID-19 on multi-modal logistics of both the demand and supply sides, and helping design public, public-private, and/or private interventions – including interventions aimed at tackling behavioral and occupational aspects of risk prevention.

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Finance

Albania Has Opportunity to Build a More Sustainable Growth Model

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Albania’s economy, like other countries in the region, is recovering faster than expected after the historic recession created by the COVID-19 pandemic. Following the contraction of the economy by 4 percent in 2020, GDP growth is projected to reach 7.2 percent in 2021, one of the highest among Western Balkans countries, says the latest edition of the Western Balkans Regular Economic Report, Greening the Recovery.

The strong recovery is supported by consumption, tourism, and construction. Going forward, growth is expected to moderate at 3.8 percent in 2022 and 3.7 percent in 2023.

Albania’s poverty rate is projected to fall below its pre-pandemic level by end-2021. Employment and labor force participation is also recovering, albeit with a lag, and real wages are increasing.

The recovery is contributing to fiscal revenue collection. Macroeconomic policies have supported the recovery, but higher spending has led to a further rise in the debt-to-GDP ratio. Economic uncertainty remains high, as the COVID-19 pandemic continues worldwide.

“The Albanian economy has shown encouraging signs of recovery in 2021,” said Emanuel Salinas, World Bank Country Manager for Albania. “As growth rebounds, Albania has the opportunity to strengthen the sustainability of its economic model and implement reforms that further support sustainable and shared growth, while preserving macroeconomic stability.”

The report shows that the Western Balkans region has improved significantly, with GDP growth now projected to reach 5.9 percent in 2021, after a 3.1 percent contraction in 2020. Growth in the region is projected at 4.1 percent in 2022 and 3.8 percent in 2023.

The poverty rate for the region is projected to resume its pre-pandemic downward trend and fall by around 1 percentage point to 20.3 percent, close to its 2019 level.

The regionwide recovery is due to strength in both domestic and external demand. A sharp rebound in domestic consumption and in travel across Europe helped boost remittances as well as tourism inflows during the 2021 peak summer season. A strong recovery in advanced economies also provided a boost to demand for the region’s exports.

However, the recovery remains fragile. Early warning signals from the labor market call for close policy attention. Job losses from the recession and its aftermath have disproportionately affected women and youth, which may set back efforts to raise the region’s perennially low rates of labor force participation. Youth unemployment in the region rose to 37.7 percent in 2021, up 5.4 percentage points from June 2020, further worsening youth employment prospects.

“As the Western Balkans countries look to a post-pandemic future, their policy approach will need to focus on addressing key impediments to job creation and economic transformation, including green transition,” said Linda Van Gelder, World Bank Country Director for the Western Balkans. “All six countries would benefit from reforms in the business environment, governance, and digitalization, which would contribute to growth and close the gap with EU countries.”

The report also looks at the macro-fiscal challenges and drivers of greening the region’s growth. The Western Balkans now find themselves at a key decision point regarding the impending green transition.

Global strides toward climate action are causing fundamental changes in society. Consumer and investor preferences are shifting, green technologies and new business models are disrupting more markets, and green policies are reshaping economic landscapes. As such, greening a country’s economy is becoming a decisive factor in international competitiveness and the ability to attract international finance and investments.

The Western Balkans are no exception. Still characterized by a development model tilted toward familiar brown industries, moving toward a green growth pathway is far from easy, especially in the short term. Yet, the green transition offers significant opportunities for the Western Balkans – including closer integration into Euro-centric global value chains and access to significant EU resources to help fund a green transition.

Effectively managing this green transition, including the many policy tradeoffs, will need to be a core focus of policy attention for the Western Balkans in the years ahead.

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Montenegro on Course for Stronger Economic Recovery in 2021

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The Western Balkans region is rebounding from the COVID-19-induced recession of 2020, thanks to a faster-than-expected recovery in 2021, says the latest edition of the Western Balkans Regular Economic Report, Greening the Recovery.

The outlook for the region has improved significantly, with GDP growth now projected to reach 5.9 percent in 2021, after a 3.1 percent contraction in 2020. Growth in the region is projected at 4.1 percent in 2022 and 3.8 percent in 2023.

Driven by a rapid recovery in tourism, Montenegro’s economy is projected to rebound strongly by an estimated 10.8 percent in 2021, the highest rate among the six Western Balkan countries. Strong peak summer season has supported a rebound in tourism revenues, which are likely to reach close to 75 percent of their 2019 levels, from 55 percent previously estimated.

The rebound of economic activity has boosted government revenues, which coupled with careful fiscal management have led to a reduction in fiscal deficit from 11 percent of GDP in 2020 to an estimated 4 percent in 2021. Maintaining fiscal prudence in the medium term will be critical, as uncertainties loom.

“The economic crisis brought on by the COVID-19 pandemic continues to be a source of uncertainty, but also presents an opportunity for Montenegro to ensure a resilient, inclusive, and green post-pandemic recovery,” says Christopher Sheldon, World Bank Country Manager for Bosnia and Herzegovina and Montenegro. “The World Bank is committed to helping Montenegro implement reforms that can help ensure macroeconomic stability, create economic opportunities, and spur strong private-sector led growth”.

The report finds that unemployment in Montenegro remains high as the recovery has not ignited the labor market yet, which limits the pace of resumed poverty reduction. Poverty is projected to decline slowly in 2021, but it remains higher than its 2019 level.

The poverty rate for the region is projected to resume its pre-pandemic downward trend and fall by around 1 percentage point to 20.3 percent, close to its 2019 level.

The regionwide recovery is due to strength in both domestic and external demand. A sharp rebound in domestic consumption and in travel across Europe helped boost remittances as well as tourism inflows during the 2021 peak summer season. A strong recovery in advanced economies also provided a boost to demand for the region’s exports.

However, the recovery remains fragile. Early warning signals from the labor market call for close policy attention. Job losses from the recession and its aftermath have disproportionately affected women and youth, which may set back efforts to raise the region’s perennially low rates of labor force participation. Youth unemployment rose to 37.7 percent in 2021, up 5.4 percentage points from June 2020, further worsening youth employment prospects.

“As the Western Balkans countries look to a post-pandemic future, their policy approach will need to focus on addressing key impediments to job creation and economic transformation, including green transition,” said Linda Van Gelder, World Bank Country Director for the Western Balkans. “All six countries would benefit from reforms in the business environment, governance, and digitalization, which would contribute to growth and close the gap with EU countries.”

The report also looks at the macro-fiscal challenges and drivers of greening the region’s growth. The Western Balkans now find themselves at a key decision point regarding the impending green transition.

Global strides toward climate action are causing fundamental changes in society. Consumer and investor preferences are shifting, green technologies and new business models are disrupting more markets, and green policies are reshaping economic landscapes. As such, greening a country’s economy is becoming a decisive factor in international competitiveness and the ability to attract international finance and investments.

The Western Balkans are no exception. Still characterized by a development model tilted toward familiar brown industries, moving toward a green growth pathway is far from easy, especially in the short term. Yet, the green transition offers significant opportunities for the Western Balkans – including closer integration into Euro-centric global value chains and access to significant EU resources to help fund a green transition.

Effectively managing this green transition, including the many policy tradeoffs, will need to be a core focus of policy attention for the Western Balkans in the years ahead.

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Finance

North Macedonia’s Growth Projected Higher, but Economy Still Faces Risks

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macedonia

The Western Balkans region is rebounding from the COVID-19-induced recession of 2020, thanks to a faster-than-expected recovery in 2021, says the latest edition of the Western Balkans Regular Economic Report, Greening the Recovery.

The outlook for the region has improved significantly, with GDP growth now projected to reach 5.9 percent in 2021, after a 3.1 percent contraction in 2020. Growth in the region is projected at 4.1 percent in 2022 and 3.8 percent in 2023.

The poverty rate for the region is projected to resume its pre-pandemic downward trend and fall by around 1 percentage point to 20.3 percent, close to its 2019 level.

The regionwide recovery is due to strength in both domestic and external demand. A sharp rebound in domestic consumption and in travel across Europe helped boost remittances as well as tourism inflows during the 2021 peak summer season. A strong recovery in advanced economies also provided a boost to demand for the region’s exports.

For North Macedonia, this translates into a growth projection of 4.6 percent for 2021, much higher than the forecast in spring. “This positive outlook is still surrounded by downside risks, with the pace of immunization low and supply chains still disrupted, while financial conditions have started tightening,” said Massimiliano Paolucci, World Bank Country Manager for North Macedonia and Kosovo.

However, the recovery remains fragile. Early warning signals from the labor market call for close policy attention. Job losses from the recession and its aftermath have disproportionately affected women and youth, which may set back efforts to raise the region’s perennially low rates of labor force participation. Youth unemployment rose to 37.7 percent in 2021, up 5.4 percentage points from June 2020, further worsening youth employment prospects.

“As the Western Balkans countries look to a post-pandemic future, their policy approach will need to focus on addressing key impediments to job creation and economic transformation, including green transition,” said Linda Van Gelder, World Bank Regional Director for the Western Balkans. “All six countries would benefit from reforms in the business environment, governance, and digitalization, which would contribute to growth and close the gap with EU countries.”

The report also looks at the macro-fiscal challenges and drivers of greening the region’s growth. The Western Balkans now find themselves at a key decision point regarding the impending green transition.

Global strides toward climate action are causing fundamental changes in society. Consumer and investor preferences are shifting, green technologies and new business models are disrupting more markets, and green policies are reshaping economic landscapes. As such, greening a country’s economy is becoming a decisive factor in international competitiveness and the ability to attract international finance and investments.

The Western Balkans are no exception. Still characterized by a development model tilted toward familiar brown industries, moving toward a green growth pathway is far from easy, especially in the short term. Yet, the green transition offers significant opportunities for the Western Balkans – including closer integration into Euro-centric global value chains and access to significant EU resources to help fund a green transition.

Effectively managing this green transition, including the many policy tradeoffs, will need to be a core focus of policy attention for the Western Balkans in the years ahead.

Continue Reading

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