Senior executives of the World Bank gave important warnings for many developing countries, including Turkey, in their statements before the 2022 World Development Report was announced. While it was reported that Turkey’s credit rating might have negative consequences, important warnings were also made about borrowing in the private sector.
The World Bank made important warnings about the increasing debts of the private sector in developing countries, including Turkey. Stating that debts have risen so much during the epidemic period and that a global reaction that will last for generations may be triggered if the necessary steps are not taken, the World Bank opened a separate parenthesis for Turkey.
In the statement made by the World Bank, the crisis in Turkey was given a separate place. In the statement, it was reminded that the country’s rating was downgraded to BB- by the credit rating agency Fitch, and stated that this could have negative consequences for Turkey. The statement was made by the bank’s chief economist, Carmen Reinhart.
“There is a need for transparency in private sector debts”
Reinhart, referring to the downgrading of Turkey’s credit rating, reminded that the country has been in crisis for several years and said that this rating could have ‘results’ for Turkey. He stated that the share of non-performing loans remained below the level feared at the start of the pandemic, but that lenient policies and relaxed standards could hide non-performing loans. Reinhart on private sector debt more transparency is needed stressed.
Small and medium-sized businesses worldwide may fall behind on debt payments within 6 months:
Reinhart stated that the 2020 recession caused by the pandemic caused an unprecedented increase in global debt, and therefore the credit ratings of 51 countries were lowered. He also shared the striking results from the surveys. According to the surveys, small and medium-sized enterprises in developing countries 46% may fall behind debt payments within 6 months. In some countries this number is almost twice as high.
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Private sector debt can turn into public debt:
World Bank President David Malpass shared the consequences of debt in the private sector. Stating that the spillover effects of debt have risks, Malpass said that private debt, like many crises in the past, can suddenly turn into public debt warned.
Source :
https://www.sozcu.com.tr/2022/ekonomi/dunya-bankasindan-aralarinda-turkiyenin-de-oldugu-ulkelere-borc-uyarisi-6955389/