Davos WEF
Davos WEF

Trump is a challenge for emerging economies: Chairman of Argentina's Central Bank

Argentina has had a fantastic turnaround: Central bank chairman

As President-elect Donald Trump prepares to take office, concerns are mounting among emerging economies as to what extent their economies could be dented by the new policy agenda in the U.S.

Federico Sturzenegger, the chairman of the Central Bank of Argentina, told CNBC that both the fiscal stimulus and the protectionist policy that the president-elect wants to put forward are a "challenge" for Argentina and for many emerging economies.

"On the one hand the fiscal push that one is expecting from the Trump administration is going to increase interest rates so I think that is going to put a challenge for many of our economies," Sturzenegger said at the World Economic Forum in Davos, Switzerland.

"But I would say more than that in the case of Argentina, Argentina has a very low debt ratio so it is not a very significant issue but I think it's more the issue of protectionism," he added.

With U.S interest rates expected to pick up, borrowing costs for emerging economies will go up. meaning that these countries will increase their debt ratios.

However, they are also likely to be impacted by a more protectionist approach to trade.

"A backlash in (international trade) agenda is something that really worries us a lot," Sturzenegger added.

On Thursday, Argentina sold $7 billion in five-year and 10-year dollar bonds in the international market at interest rates of 5.625 percent and 7 percent. The sale went beyond expectations. The finance ministry had initially announced a sale of $3 billion to $5 billion.

"Argentina has had a fantastic turnaround in the last year," Sturzenegger told CNBC as the country moved away from exchange controls.

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