Turkey announces $18.5 billion public investment programme for 2021

Turkey has announced a 2021 public investment programme worth ₺138.5 billion ($18.53 billion), with communication and transportation projects receiving the largest allocation of the investment funds.

The programme, published in the Official Gazette late on Friday, set aside nearly $6 billion for public investments in the transportation and communication sectors in 2021, and another $2.6 billion for education projects. Other investment areas include manufacturing, health, agriculture, tourism and energy.

Under the programme, Turkey’s Transport and Infrastructure Ministry will receive some $2 billion, while the State Hydraulics Works (DSI) will receive $1.8 billion and the Highways Directorate $1.75 billion.

President Tayyip Erdogan, who has been in power for nearly 20 years with five consecutive election victories, had until 2018 enjoyed steady annual growth of around 5 per cent fuelled by cheap foreign credit and “mega projects” ranging from bridges and tunnels to highways, hospitals and other construction.

This announcement surprised analysts given that Turkey’s central government budget swung to a deficit in December. month, ending the year 2020 with a 40 per cent widening. The government posted a monthly fiscal gap of ₺40.7 billion ($5.5 billion) in December.

Meanwhile the economy is slow, and inflation in Turkey was at 14.6 per cent in December, while many people are unable to afford food and necessities, with insufficient purchasing power as the lira still at 9.04 against the euro.

A latest survey by the independent research company Metropoll reveal that 80 per cent of Turkish voters do not believe that the inflation statistics are accurate. In fact, 51 per cent think real inflation in Turkey is at around 30 per cent.

There is $21 billion in debt coming due for the central bank, and 12-month foreign currency debt repayments remain elevated at $160 billion, meaning the private sector will of course continue to see a growing number of insolvencies.

“Thanks to its large population, Turkey can still post growth of about 3 per cent in 2021. Yet, in Turkish terms, growth of 3 per cent means that a spike in unemployment and bad loans, along with the structural wounds caused by the Covid-19 economic crisis, cannot be reversed,” writes analyst Güldem Atabay.