Ar­gentina’s cri­sis a win­dow of op­por­tu­nity for Tur­key: Ex­pert

Dünya Executive - - REPORT -

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.

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