The Bulletin, Q1 2024Geopolitics, fiscal policy and institutional resilience will be key considerations in this year’s global election cycle. Rising geopolitical tensions, constrained fiscal policy and institutional resilience under pressure – as half of the world’s population heads to the polls this year, these are the key considerations surrounding this year’s global election cycle. This edition of the Bulletin looks at the implications of this super-election year for both developed and emerging economies and what we can expect for the world economy as a whole.
- Elliot Hentov, head of macro policy research at State Street Global Advisors, notes that, historically, more has been at stake during elections in newly democratic states, but this is starting to change for mature democracies.
- At the global level, OMFIF US Chair Mark Sobel observes that US-China relations and the return of Donald Trump could further raise military tensions, propelling fragmentation and protectionism.
- Some markets look to benefit from geopolitical realignments. Regardless of the outcome of the US election, Nikhil Sanghani, managing director of OMFIF’s Economic and Monetary Policy Institution, reflects on optimism that Mexico will benefit from the relocation of US supply chains.
- Geoffrey Yu, senior strategist at BNY Mellon demonstrates the important of a comprehensive industrial policy to the competitiveness of Europe’ economy.
- For others, fiscal policy is the main concern of this election cycle. In South Africa, despite calls for further social spending, fiscal expansion will be weighed against a difficult economic reality, explains Jeff Gable, head of macro and fixed income research at Absa.
- In India, Jeremy Zook, director, Asia sovereign ratings at Fitch Ratings, identifies that addressing fiscal weaknesses and rebuilding buffers will be a key challenge for the next government.
- Meanwhile, in Indonesia, uncertainties abound regarding government financing, expenditures and revenue, note Johanna Chua, head of emerging market economics at Citi Global Markets Asia, and Helmi Arman, Indonesia chief economist at Citi Global Markets.
- But fiscal policy and government debt sustainability are not just emerging market concerns. In the UK, a Labour government will be hard-pressed to deliver on promises around infrastructure and sustainability, argues Andrew Pilgrim, UK financial services partner at EY.
- Finally, this year’s elections will test the resilience of economic and political institutions in many jurisdictions. For Peter Sedgwick, former senior UK Treasury official, whoever leads the UK will need to review the institutional arrangements for monetary and fiscal policy following failings in recent years.
- Similarly, Christopher Smart, managing partner at Arbroath Group, argues that the investment case for the US ultimately depends on the strength of its institutions.
With no end in sight to the war in Ukraine and the conflict in the Middle East risking further escalation, it’s clear the era of peace dividends is over. The outcomes of this year’s elections have the potential to compound market tumult. With this in mind, policy-makers and markets should brace for even more uncertainty and volatility in 2024.
