Emerging markets are gearing up for their biggest election year in decades, with investors focused on fiscal discipline and populist shifts that could stir markets and blur the outlook for some key economies.
Countries home to more than half the world’s population and accounting for more than 60% of global economic output go to the polls in 2024.
The calendar is bookended by votes in Taiwan in January – a high-stakes geopolitical event – and in sovereign defaulter Ghana in December, as the country strives to emerge from a debt crunch.
“This is an election year like we have never seen before. It really is an extraordinary year,” said David Lubin, associate fellow at think tank Chatham House and Citi’s former head of emerging market economics.
“Recent elections in Argentina and Poland have reminded us that elections do produce surprises,” Lubin added.
The elections frenzy comes against a backdrop of sharply higher global borrowing rates – piling pressure on more fragile economies even though the prospect of interest rate cuts from the world’s big central banks is firmly on the horizon.
For investors, elections divide into three categories: Those where the outcome is rather obvious, such as Russia or Venezuela; those where it seems clear but the ballot is contested, for example India, Mexico or Indonesia; and those where there is genuine uncertainty, like in South Africa.
The 2023 polls in Argentina and Poland also served as reminders that governments due to face their electorates are more often than not prone to loosening the purse strings – a trend that can leave those who take over struggling to roll back the handouts.
Even when Argentina’s previous government ramped up spending between the first and second round of their vote, radical Javier Milei swept to power and embarked on a radical reform programme. In Poland, the surprise election win of the liberal, pro-EU Donald Tusk got the thumbs up from investors.
Source: CNBC
