Argentina tops Bloomberg list of most vulnerable emerging markets
The quarterly Emerging Market Economy Scorecard published today by Bloomberg showed Argentina overtaking Turkey as the most vulnerable to external shocks among the 20 leading emerging economies surveyed.
Five major parameters were measured: current account balance; short-term external debt; hard-currency reserves; inflation; and "government effectiveness."
Argentina scored lowest on inflation, which reached 55.8% in June (compared to government projections of 20%); and on its short-term external debt, which reached 40.5% of GDP.
The country's balance of payments deficit (3.5% of GDP in the first quarter) is now made up entirely of foreign debt interest outlays, which have ballooned from $5.1 billion in 2015 (0.8% of GDP) to at least $20 billion this year (4.5% of GDP).
Argentina's current account deficit reached 5% of GDP in both 2017 and 2018, cutting off Argentina's access to foreign credit markets on growing fears of a future default.
The crisis forced the central bank to raise base interest rates from 27% in April 2018 to 59% currently to discourage capital flight, and to turn to the IMF for a record, $57 billion bailout.
The ensuing recession - the second since Mauricio Macri took office in 2015 - has led to a 5.8% fall in GDP, a 24.6% collapse in fixed investment, and 291,000 registered job losses as of May.
Including massive bond debts taken on by Macri in 2016-18, the next administration (2019-23) faces around $150 billion in foreign debt payments.
The 20 countries surveyed in the Bloomberg scorecard include 35% of the world's economy, and 55% of the world's population.
At: https://www.bloomberg.com/news/articles/2019-07-24/emerging-markets-less-at-risk-from-turkey-this-time-round-chart
Argentine President Mauricio Macri entertains U.S. Secretary of State Mike Pompeo during the latter's visit to Buenos Aires earlier this week.
Macri enjoys staunch support from President Donald Trump, who reportedly ordered both Pompeo and Commerce Secretary Wilbur Ross to facilitate Macri's unlikely re-election (he's behind in most polls) and the IMF to rubber-stamp all loans to Argentina until the October elections.
Critics warn that Trump's bailout is setting the stage for a likely default by Argentina by 2022, should the IMF refuse to renegotiate the debt with Macri's successor.
