Moody's Sees Sharp Contractions in Turkey and Argentina (Bloomberg)
Last Modified: 05:21 AM, Thu Nov 08, 2018

Turkey and Argentina will undergo sharp contractions in the coming quarters as economic growth decelerates across advanced and emerging market economies, Moody's said in a report today. As monetary tightening in major economies and geopolitical trade disputes continue to undermine investment globally, Moody's is taking an increasingly dim view of the growth prospects of emerging markets like Turkey and Argentina, which "have relatively high exposures to external financing and therefore the most vulnerable." Turkey's economy will likely contract through the first half of next year as the lira's slump and rising borrowing costs take their toll on the economy, the rating provider said. The Argentine economy will not return to positive growth until 2020 due to severe monetary and fiscal consolidation under the IMF program, it said.

Wire: Bloomberg News (BN) Date: Nov 8 2018  2:36:44
By Cagan Koc

     (Bloomberg) -- Turkey and Argentina will undergo sharp
contractions in the coming quarters as economic growth
decelerates across advanced and emerging market economies,
Moody’s Investors Service said in a report Thursday.

     As monetary tightening in major economies and geopolitical
trade disputes continue to undermine investment globally,
Moody’s is taking an increasingly dim view of the growth
prospects of emerging markets like Turkey and Argentina, which
“have relatively high exposures to external financing and
therefore the most vulnerable.”

     Turkey’s economy will likely contract through the first
half of next year as the lira’s slump and rising borrowing costs
take their toll on the economy, the rating provider said. The
Argentine economy will not return to positive growth until 2020
due to severe monetary and fiscal consolidation under the IMF
program, it said.

     Turkey’s inflation is hovering near the fastest pace since
President Recep Tayyip Erdogan came to power 15 years ago, and
high borrowing costs are clouding investment outlook. “Double-
digit inflation, a steep increase in borrowing costs and
curtailed bank lending are likely to weigh on household
purchasing power, private consumption” and investment, Moody’s
said.

     Moody’s expects Turkish inflation to remain at double-
digits through 2020 on unanchored inflation expectations spurred
by exchange rate and oil price pressures. Turkey’s inflation
accelerated to 25.2 percent in October as the weak lira
continued to fuel price gains.

     Inflation expectations in Argentina continue to rise
despite the central bank’s very tight stance and it will take
some time before the benefits of a new monetary framework fully
materialize, Moody’s said. It expects inflation to gradually
fall to 20 percent by the end of 2020.

     Moody’s sees Turkey’s economy growing 1.5 percent in 2018
and contracting 2 percent the following year. It predicts
Argentina’s economy will contract 2.5 percent this year and 1.5
percent in 2019.

--With assistance from Onur Ant.

To contact the reporter on this story:
Cagan Koc in Istanbul at ckoc2@bloomberg.net
To contact the editors responsible for this story:
Benjamin Harvey at bharvey11@bloomberg.net
Amy Teibel, Taylan Bilgic

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