Turkey needs higher productivity for continual growth: World Bank

ANKARA-Anadolu Agency

Sustaining growth and improvements in living standards in Turkey will require higher productivity, the World Bank said on July 24.

In a written statement, the World Bank Group said it recently launched an economic memorandum on "Firm Productivity and Economic Growth in Turkey" at a conference held in the capital Ankara.

"While acknowledging the importance of economic stability, the memorandum explored how Turkey could achieve sustained growth by accelerating productivity, particularly in 'pro-development' sectors, capable of delivering both added value and employment," it said.

The World Bank highlighted that economic integration and innovation have boosted firm-level productivity, though reforms could further accelerate these positive impacts.

"The analysis shows that the most productive industries and firms are not necessarily capturing the most resources.

"Apart from a handful of industries such as motor vehicles, basic metals and textiles, productivity in manufacturing has more recently stagnated," it said.

The group said that while construction and services have expanded rapidly, they also exhibit low and falling productivity.

"In services, there is scope to expand more sophisticated industries like information and communications technologies which raise productivity in manufacturing and other sectors," it said.

The World Bank also noted that growth and development required more productive companies to compete in the current world market, which can be enabled through structural reforms.

"When companies raise their productivity through added technical capacity and innovation, unproductive firms are forced to exit the market, freeing up resources for the more efficient firms, including new entrants.

"As a result, the sector expands. Capital and human resources then move into the expanding, higher productivity sectors and out of low productivity sectors – a process of structural transformation which accelerates economy-wide productivity and growth," it said.

The group concluded that Ankara could adopt reforms to promote productivity growth in firms and allocate resources more efficiently.

"Further economic integration, for instance, would increase the connectedness of Turkey's firms with international business and global value chains, precipitating fresh gains in productivity.

"Well-targeted public incentives for innovative firms, including young enterprises, could also encourage new business lines, new technology, and more efficient processes," it added.