Inflationary Rates Differences between Turkey and Argentina

Inflationary Rates Differences between Turkey and Argentina

Inflation rate refers to the sustained increase in the prices of goods and services in the economy over a given period of time. With a general rise in the price level of goods and services, a country’s currency depreciates because each unit of the currency buys fewer products, thus reflecting the negative effects of inflation rate on currency depreciation and reduction of consumer purchasing parity. Hence, there is no doubt that the level of inflation rate in the economy is often a significant concern for different stakeholders in a country. Most economists believe that low and steady rate of inflation is essential in the economy to help reduce the severity of economic recession thus enabling a country’s labor market to adjust effectively when faced with economic downturn quickly. Turkey and Argentina are some of the countries which often grapple with high inflation rates. Despite the various measures that these two countries often implement to address inflation rate, the ability of either the governments to adequately address inflation rate has always remained futile because of economic, geographical, political, and demographic factors which influence the high inflation rates witnessed in these two nations.

Demographic differences between Turkey and Argentina

The demographic study of a nation is of immense importance in the county’s planning process. The study of demography enables the government to understand the population nature of its citizens based on how the population increases or decreases over time and how such changes manifest on the country’s labor force and economic performance. In 2011, Turkey’s population was estimated to be 78, 785,548 people with a 1.2% annual population growth rate and a median population of 28.5 (“Turkish Statistical Institute,” n.d.) Argentina, on the other hand, had a population of 40,117,096 during the country’s 2010 census. Based on these two statistics, it is evident that Turkey is relatively populated than Argentina despite the latter being geographically bigger than the former. The high population of Turkey means that it has a higher labor supply and a broader market than Argentina. The median age of Turkey which is 28.5 years if compared to that of Argentina which is 34 years for women and 32.9 for men indicates that most of the Turkish nationals are young adults while the majority of Argentine’s citizens are mature adults. Hence, Turkey has a more youthful population than Argentina. On the aspect of resource allocation by their respective governments, Turkey is likely to suffer from inadequate resource allocation compared to Argentina because of the higher population of the former.

Economic differences between Turkey and Argentina

Argentina is a middle-income nation and is one of the most developing nations across the globe. The country is benefiting from its abundant natural resources, diversified industrial base, highly export-oriented agricultural sector, and a high literacy level among its population as some of the key macroeconomic drivers of the economy. The country has a relatively higher GDP and GDP per capita which was pegged at $922 billion and $20,481 respectively by the end of 2018. Historically, Argentina has witnessed mixed and uneven economic performances associated with high economic growth alternating with a high inflation rate, severe recessions, income inequalities, and increasing poverty levels amongst the majority of its population. Today, the country is a member of different economic and political organizations such as the United Nations, the World Bank, the G-20 economies, the International Monetary Fund (IMF), and other economic and trading blocs in South America.

Turkey, on the other hand, is the world’s 13th largest economy in terms of GDP purchasing power parity (PPP) and the 15th largest economy on the basis of nominal GDP. Turkey has a sizeable manufacturing sector with much focus being the automotive industry which produces over 1.3 million motor vehicles annually, ranking it the 14th largest manufacturer of automobiles globally (“Fund management,” 2009). The country also has a dominant export sector which has in recent years experienced positive growth margins. The agricultural sector is also vital in the country’s economy since it is the one that produces resources which facilitate the growth of the export sector. Some of the key importers of Turkey’s agricultural products are European countries, the US, and other Asian countries. For instance, in 2016, the European Union imported fruit and olive from Turkey worth 738 million Euros, translating to about 10% of Turkey’s annual GDP. The EU has also been an important market for Turkey’s textile products. The union’s entire clothing and textile industries rely on 73% raw materials from Turkey’s textile exports. Despite its growing economy, Turkey grapples with various economic challenges such as high inflation rate, increasing income inequality, high unemployment rate, and the devastating effects of the Syrian civil war.

Inflation rate in Argentina and Turkey

Since 2012, Turkey has witnessed increasing but stable inflation in the past five decades until the occurrence of the Arabi spring that begun in 2010. In 2012, the country’s inflation rate was 8.89% but later slightly reduced to 7.49% in 2013 before it again rose to 8.86% in 2014. In 2015, the inflation rate decreased slightly to 7.67% then increased with an insignificant margin to 7.78%. The increase in the inflation rate was significant in 2016 when it rose to 11.14% then further increased to 15.1% in 2018. While the rates are expected to reduce slightly to 14% in 2019 and further to 13% by 2020, there are high higher chances that these rates might continue to increase in the next two years if the civil war in Syria continues. The Syrian civil war has affected Turkey’s economy on two ways; the increasing number of immigrants from Syria who are entering the country and the continued political tension between the country and the US on the Syrian war (Akgay, Cevdet, Emre, and Ozmucur 84).

Turkey, being one of the neighbors of Syria, has been the choice of many refugees who seek asylum and humanitarian assistance from other countries. The increased population due to the influx of refugees in Turkey has resulted in increased demand for essential goods and services, thus pushing the country’s inflation rate upwards. Also, the country has been a staunch opposer of the US in the Syrian war by supporting President Assad while the US has been supporting the rebels, whose main intention is to see the ouster of Assad. The Turkish government intervention in Syria in 2017, which saw Aits military directing various attacks against the Islamic State of Iraq and the Levant (ISIL) and the Syrian Democratic Forces (SDF), angered the US. The US government responded by withdrawing its annual financial aid to Turkey and even implementing trade sanctions against Turkish exported products. These sanctions have resulted in a significant drop in the latter’s export earnings, which has resulted in a high inflation rate.

Argentina, on the other hand, has been experiencing a high rate of inflation coupled with hyperinflation. During the period between 1945 and 1974, the country witnessed rapid economic growth and development which was characterized by a reduced unemployment rate and stable prices of goods and services, and the annual inflation rate ranging below the 10 percent mark. However, the country later plunged into political and economic crisis in 1975 and 1976 which was key macroeconomic variables such as inflation rate, employment rate, and balance of payment, worsening for over 15 years. During this period, the country’s inflation rate increased by over 300 percent annually, thus resulting in hyperinflation (Fleischer and Baer 335). Despite the previous Argentinian governments trying to control and even reduce the high inflation rate, they have managed, but they have failed to develop a permanent solution to the country’s high inflation rate. The country’s inflation rate has been increasing over the years with the rates estimated at 10.0% in 2012, 18.4% in 2013, 38.0% in 2014, 26.7% in 2015, 41.2% in 2016 then decreasing to 27.7% in 2017 (FactFish). If compared with the Turkish inflation rate, it is evident that Argentine’s economy is suffering from higher levels of inflation rates, thus indicating that the cost of living is extremely high in Argentina than in Turkey.

Measures adopted by Argentine and Turkish governments to address inflation

The Turkish government has relied solely on monetary policies to address the impacts associated with the inflation rate. For instance, the government, through the central banks, has increased the excessive reserve ratio that commercial banks are expected to hold. The government has also been raising the interest rates to cut down on the level of borrowing thus reducing the circulation of money in the economy. With reduced money supply, the country’s demand for goods and services has decreased significantly thus stabilizing the prices. The adoption of higher excess reserve ratio for banks has strengthened the banking sector by ensuring that there is a controlled flow of money in the economy thus strengthening price stability in the economy. The government also resorted to Open Market Operations where it sold its bonds and securities to the public to mop out the excessive money supply in the economy (Cinar and Tekin 160).

While the Turkish government’s intervention in addressing the high inflation rate was mainly pegged around the controlling the banking sector and the sales of Treasury bonds through the Open Market Operations, the Argentinian government, however, relied on artificial manipulation of its foreign exchange reserve. The Argentinian government, between 1991 and 2002, through the currency board, introduced the fixed pegging between the country’s peso to the US dollar to eliminate hyperinflation and stimulate rapid economic growth (El-Erian). The government failed to realize that the high hyperinflation was a result of unsustainable growth in the country’s money supply. The government’s plan to manipulate the foreign exchange reserve, however, became futile as the US dollar kept on appreciating resulting in an overvaluation of the Peso and consequently increasing the prices of goods and services in Argentina. However, after realizing flaws of the system, the Argentinian government dropped in 2003 which brought a drop in the rate of inflation. Today, Argentina uses the free-floating system where the value of the peso against other major currencies, like the dollar and the pound, is determined by the market demand and supply of these currencies (Engelmann). The new system has enabled the government to reduce the inflation rate significantly even though it is still high if compared to those of other developed countries.

It is evident from the above analysis that while the Turkish inflation rate is as a result of the continuing civil war in Syria and the opposing views the country holds against the US government on this war, the Argentinian high inflation rate is as a result of weak macroeconomic policies adopted by the government. It is also eminent from the above discussion that while the Turkish government has managed to control and reduce the high inflation rate, the policies adopted by the Argentinian government has remained futile as the economy frequently grapples with the economic and social effects of its high inflation rates which remain above the 20% mark. The Argentine government should, therefore, resort to other effective monetary and fiscal policies such as increasing the interest rates, reducing government spending, increasing excess reserve ratio, implementing the Open Market Operations and even expanding its export sector to enhance the value of peso against the dollar. It is apparent that the inflation rate of a country is influenced by existing demographic, macroeconomic, and political factors both in the country and across the globe.




Works Cited

Akgay, O. Cevdet, C. Emre Alper, and Suleyman Ozmucur. “Budget Deficit, Inflation and Debt Sustainability: Evidence from Turkey, 1970-2000.” Inflation and disinflation in Turkey. Routledge, 2018. 83-102.

Cinar, Kursat, and Tekin Kose. “Economic crises in Turkey and pathways to the future.” Journal of Balkan and Near Eastern Studies 17.2 (2015): 159-180.

El-Erian, Mohamed. “Argentina’s New Government Needs to Act Quickly to Fix the Economy.” The Guardian, 22 Dec. 2015, Accessed 5 March 2019.

Engelmann, Nicholas. “Argentina’s Inflation Problem, and How It’s Permeated Every Aspect of the Culture.”, 7 Dec. 2016, Accessed 5 March 2019.

FactFish. Argentina: Inflation, consumer prices (annual %). Retrieved from

Fleischer, David, and Werner Baer. The Economies of Argentina and Brazil: A Comparative Perspective. Edward Elgar Publishing, 2011.

Fund management. 2009, July 16. The Economist. Retrieved from

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