Argentina’s crisis a window of opportunity for Turkey: Expert
Argentina’s economic turmoil has raised some concerns for future emerging economies, revealing some facts about the role of the International Monetary Fund (IMF) in global development and providing opportunities for Turkey, experts say.
The South American nation has faced massive financial turmoil in recent weeks due to uncertainty stemming from the upcoming presidential election, which has shaken off business-friendly President Mauricio Macri’s power. When he became the president in 2015, Macri pledged to revitalize Argentina’s economy. Less than three years later, he had to opt for the IMF. A stand-by agreement with the IMF in mid-2018 for $57 billion was
aimed at convincing foreign investors to invest in the country as well as supporting the government in fighting against an ever-increasing fiscal deficit and skyrocketing inflation. But the fund has not been helpful, as expected, and austerity measures have led Argentinians - who blame IMF policies for destroying the economy in the early 2000s - to protest Macri’s government amid rising tensions over higher consumer prices. Also, foreign investors have rushed to sell pesos as the local currency grapples with the upheavals.
Investors eye Turkey
“Although the crisis in Argentina has a negative impact on emerging economies, this could also bring some opportunities for Turkey that relatively seems better compared to others,” said a source from JP Morgan who asked not to be named due to restrictions on speaking to the media. He added not only Argentina faces these problems but also other emerging countries such as Russia, Brazil and Mexico, prompting foreign investors to return to Turkey. Recalling the sanctions imposed on Russia over the Crimea crisis, he noted financial institutions such as the European Bank for Reconstruction and Development (EBRD) and International Financial Cooperation (IFC) have turned their eyes to Turkey. “Financial markets are not black and white,” he said, adding that Argentina’s economic turmoil could have both negative and positive impacts on Turkey’s economy.
Comparing Argentina and Turkey
Erhan Aslanoglu, a professor from Istanbul-based Piri Reis University, said Turkey and Argentina have different dynamics in terms of their economic fundamentals. “The former has private sector debt while the latter struggles with government debt, credit-based economic growth and current balance deficit,” he said. He added that Argentina could not rebalance its economy since last year despite an IMF loan and higher interest rates.
“Turkey has a different story. In the aftermath of the currency crisis it has managed to move ahead in the rebalancing process,” he said, citing the economy contracted at a slower rate in the second quarter of 2019 than in the previous three months.