Question

explain the main similarities and differences between the Argentina crisis and turkey crisis

Answer 1

Answer :- The financial condition of Argentina has gotten worse. Peso sank 19% against US currency. Both Argentina and Turkey are emerging economies who has experienced economic crises and received help from IMF during 2000s. Crisis in both the countries are not same.

Similarities :-

Inflation rate is high on both the countries.

Argentina is going through high inflation which has crossed 30% in July , it was 25 % in 2017 . Moreover it was 40% during 2016.

Turkey inflation rate is 18% in August from 17% in previous month.

Turkey and Argentina is facing problem with high debts and is more sensitive to foreign investment.

Argentina recorded it's current account deficit surpassed 5% of GDP . Countries primary fiscal deficit is 2.7% of GDP in this year and 1.3 % during 2019. Planned to bring it to 0% till next year. (2020) government wants to cut it's fiscal deficit level by series of reforms such as reduction in expenditure and tariff.

Turkey current account deficit is 7% of gross domestic product.

Differences :-

Argentina and Turkey is handling crisis in different way. Argentina is adapting IMF plan and implenting austerity measure to reduce deficit. As the government is planning to eliminate deficit completely till 2019 . Argentina has planned to accelerate stringent fiscal tightening measures like re-imposing of export taxes, delay in planned taxes cut to give benefit to corporates. Government spending will also be cutted down. Central bank adopted rate hikes many times to rescue currency from panic selling.

Turkish President Erdogan has restrain to rise interest rate due to coming election as the central bank is controlled by him. Central bank is injecting liquidity to market which will cause higher inflation .

Argentina the situation is getting worse as the Macri has requested IMF for laons. IMF accompanied no statement untill some time but later it's statement was vague itself. Due to lack of communication and Macri handled the situation made worsen the condition.

Turkey diplomatic dispute with America was the last straw for economic crisis. Problem lies with Erdogan policies. Main priority is to restore market and finding the way out of crisis is not be that easy.