In 2025, global economic trends are colliding in concerning ways. The IMF’s April World Economic Outlook warns of slowing global growth and sticky inflation, with emerging markets facing the “stagflation squeeze” more than ever before. These economies—particularly Argentina, Turkey, and South Africa—are navigating rising consumer prices alongside sluggish economic expansion, tighter global financing conditions, and an unpredictable global policy environment. Dive into the IMF’s latest warnings on stagflation in 2025. See how Argentina, Turkey, and South Africa are being squeezed by rising prices and slowing growth, and what this means globally.
Stagflation—a rare mix of stagnation and inflation—is no longer a relic of the 1970s. Today, the IMF highlights that while headline inflation is expected to ease globally to 4.4% in 2025, emerging markets are seeing inflation decline more slowly than advanced economies. With interest rates elevated globally, capital outflows remain a threat, and these nations are entering a delicate economic balancing act.
This blog examines how emerging economies are being especially impacted by this macroeconomic squeeze—using fresh data and country-specific analysis to unpack the causes, consequences, and responses to stagflation in Argentina, Turkey, and South Africa. We end with reflections from global strategy expert Mattias Knutsson on what this means for procurement, investment, and recovery planning.
Argentina: From Hyperinflation to Stagflation Tensions
Argentina is often the poster child of economic volatility, but its 2025 condition reflects wider EM stagflation dynamics.
After decades of chronic inflation and frequent currency crises, Argentina’s inflation reached a staggering 211% in early 2024—declining to around 43.5% by May 2025, thanks to hard austerity and IMF support under President Milei. The IMF forecasts inflation to settle at 30% by year-end, while growth is projected at 5.5% by BBVA, thanks to tighter monetary policy and fiscal adjustment.
But this recovery comes with downside risks:
Real wages are only incrementally recovering—many workers still fall behind inflation. Unemployment rose to 7.9% early 2025, the highest since 2021. The economy remains fragile, with dependence on IMF financing, volatile agricultural exports, and weak domestic demand.
Argentina is caught between desperate inflation fighting and stagnant consumer activity—a textbook stagflation scenario, where growth and consumer purchasing power remain out of sync.
Turkey: A Turning Point or Continued Volatility?
Often celebrated for its resiliency, Turkey faces a precarious position entering 2025.
Inflation peaked near 50% in 2023, but thanks to high interest rates and structural reforms, it dropped to around 21% by 2025. The central bank projects even lower inflation this year, supported by fiscal restraint and export-driven growth. Turkey’s shift to technocratic economic management has helped stabilize the Turkish lira and attract investors interested in high-yield local bonds.
Yet, challenges persist:
Elevated global borrowing costs squeeze Turkish corporates. Growth has slowed from double digits to mid-single digits, showing signs of softening domestic demand. Vulnerabilities remain in the banking sector and real estate market.
Turkey illustrates an uneven recovery—where inflation eases but growth may struggle to follow. With geopolitical tension impacting tourism and trade, the country sits perilously close to a prolonged stagflation scenario if momentum slows further.
South Africa: Inflation Meets Fragile Growth
South Africa’s economy has been mired in structural issues—electricity insecurity, unemployment above 30%, and tepid investment inflows.
Inflation peaked near 7.5% but has eased to around 5–6% in early 2025, sitting above the central bank’s targets. Growth, meanwhile, is forecast for around 1–1.5%, dragged down by energy instability and policy paralysis.
Key risks include:
Rising global interest rates are straining public debt servicing. Load shedding (power outages) continues to stifle industrial production and deter foreign investment. Household incomes are squeezed—a fertilizer for social instability.
South Africa’s situation highlights how low growth and moderate but persistent inflation can create stagflation pressures even outside hyperinflationary contexts.
Common Spotlights: Why These Economies Stand Out
Several shared reasons underlie the emerging stagflation risk across these economies:
Elevated Global Rates: Tight monetary policies in advanced economies increase borrowing costs and capital flight risk.
Fiscal Constraints: Balancing debt control with growth support is especially complicated under inflationary pressure.
Local Currency Weakness: FX depreciation amplifies imported inflation—particularly acute in commodity-dependent economies.
Supply Disruptions: Whether Argentina’s agricultural variability, Turkey’s energy costs, or South Africa’s load-shedding, supply shocks intensify price pressures.
These shared stressors distinguish emerging markets from their developed peers. While global inflation falls, these economies remain exposed.
Policy Options & Trade-offs
The IMF recommends a precise policy mix for these fragile economies:
Primary Role for Monetary Tightening: Anchoring inflation expectations is vital, even with short-term growth sacrifices.
Targeted Fiscal Measures: Structural investment in productivity-enhancing sectors, while avoiding distortionary subsidies.
Structural Reform: Improving labor force participation, electrical capacity (South Africa), trade liberalization, and financial inclusion.
External Cooperation: Access to concessional finance or debt rollover can ease financial strains.
For Argentina and Turkey, IMF engagement offers lifelines—though at the social cost of austerity. South Africa’s avenue lies in better cooperation with multilateral banks to fund infrastructure without stoking inflation.
Looking Ahead: What Could Spark a Stagflation Crisis?
Policymakers should track these triggers:
Central Bank Over-tightening: Aggressive rate increases could trigger recession without bringing inflation down quickly.
External Shocks: A steep oil spike, food supply breakdown, or financial crisis could derail fragile recoveries.
Policy Misalignment: Premature loosening or excessive fiscal spending risks a return to inflation without growth.
Social Strain: Inflation-induced poverty and inequality can destabilize societies, reducing political willingness for reform.
Implications for Global Investors and Procurement Leaders
For investors, stagflation in these economies presents both risk and opportunity:
Yield-hunting in local bonds offers appeal amid high interest rates but comes with FX exposure. Equity markets may benefit from export-oriented sectors while domestic consumption remains weak. Infrastructure-focused investing could support structural reform efforts.
Strategic procurement leaders—like Mattias Knutsson—should interpret stagflation as a signal to manage supply chain risk. As he notes:
“In stagflation conditions, control over cost, continuity, and geopolitical exposure becomes critical. Procurement must diversify partners, build buffer capacity, and hedge currency exposure.”
Conclusion:
Stagflation may not be headlines yet, but the warning signs in Argentina, Turkey, and South Africa are serious. The IMF calls this a “critical juncture” in global economic policy—with emerging markets most exposed to imbalance.
Their futures hinge on intelligent policy: central banks anchoring inflation, targeted reforms unleashing supply potential, and international support to buffer volatile conditions.
As Mattias Knutsson reminds us: “Managing procurement in these times is about resilience—building flexibility, mitigating cost spikes, and ensuring value under pressure.”
Balancing inflation control and growth ambitions won’t be easy. But with foresight and coordination, the stagflation threat can be managed—and emerging markets can not merely survive, but strengthen for the next decade.
