With two wars and 50 elections, the global economy faces mounting geopolitical risks

Los Attacks on maritime transport Indispensable in the Straits Red Sea Another dose is being administered by a determined group of Yemeni fighters in the aftermath of the war between Israel and Hamas in the Gaza Strip. Instability for the global economy It also contends with rising geopolitical tensions.

There is a risk of conflict increasing Middle East It is the latest in a series of unpredictable crises like the coronavirus pandemic. COVID-19 And this War in UkraineIt has scarred and diverted the global economy like a bear's paw.

As if that weren't enough, there's more volatility on the horizon Nationwide election wave The consequences are profound and long-lasting. More than two billion people will go to the polls this year in about 50 countries, including India, Indonesia, Mexico, South Africa, the United States and 27 member states of the European Parliament. In total, participants in the 2024 Electoral Olympiad account for 60 percent of global economic output.

In strong democracies, elections are held simultaneously Mistrust of government is on the riseVoters are deeply divided and there is a deep and persistent concern about the prospects for the economy.

Even in countries where elections are not free or fair, leaders worry about the health of the economy. Maybe the president Vladimir Putin The fall prompted a decision by exporters to convert foreign currency into rubles to prop up the Russian currency and lower prices ahead of Russia's presidential election in March.

The winners will make important policy decisions that will affect industrial subsidies, tax breaks, technology transfers, development of artificial intelligence, regulatory controls, trade barriers, investments, debt reduction and energy transition.

A wave of electoral victories coming to power Angry populists Governments can be an imposing cause Strict controls on trade, foreign investment and immigration. Diane Coyle, a professor of public policy at the University of Cambridge, said such policies would tilt the global economy toward “a very different world from the one we're used to.”

In many places, skepticism about globalization is fueled by stagnant incomes, declining living standards and growing inequality. However, Coyle said, “a world of declining trade is a world of declining incomes.”

He warned that the above increases the likelihood of falling into a “vicious circle” as the election of right-wing nationalists further weakens global growth and damages the future of the economy.

Many economists have compared recent economic developments to those of the 1970s, but the decade that Coyle has in mind is the 1970s. 1930when Political upheavals and financial imbalances “give rise to populism, contraction of trade and, finally, radical policies.”

Next year the big election will be held India. Currently the world's fastest growing economy is trying to compete with China as the world's manufacturing hub. Presidential election Taiwan In January, tensions between the US and China may escalate. In Mexico, the elections will determine the government's approach to energy and foreign investment. Also, the new President Indonesia This could change policies regarding very important minerals such as nickel.

Of course, the presidential election America They will be very important to the global economy. Approaching competition is already influencing decision-making. Last week, Washington and Brussels agreed to suspend tariffs on European steel and aluminum and US motorcycles and whiskey until after the election.

The deal sends a message that President Joe Biden has taken a firm stance on trade deals amid a contested election. Former President Donald TrumpThe mostly Republican candidate has supported protectionist trade policies and has proposed a ten percent tariff on all goods entering the United States, a belligerent move that will inevitably prompt retaliation from other countries.

Following authoritarian leaders, Trump has signaled that he will scale back US partnerships with Europe, scale back support for Ukraine and take a more confrontational stance toward China.

“Elections may bring results Far-reaching changes in domestic and foreign policy issues, including climate change, regulations and global alliances” concluded consulting firm EY-Parthenon in a recent report.

So far, the outlook for the global economy next year is mixed. In much of the world, growth remains sluggish and dozens of developing countries are at risk of defaulting on their sovereign debt. On the positive side of the balance, a rapid decline in inflation prompts central banks to cut interest rates or at least reduce their hikes. Lower borrowing costs always spur investment and home buying.

As the world continues to fracture into uneasy alliances and rival blocs, The Security issues They will affect economic decisions more than they ever did.

China, India and Turkey increased their purchases of Russian oil, gas and coal after Europe cut back sharply after Moscow invaded Ukraine. At the same time, tensions between China and the United States have prompted Washington to respond to years of Beijing's strong support for the industry by offering huge concessions on electric vehicles, semiconductors and other goods deemed critical to national security.

Drone and missile attacks by Houthi militias in the Red Sea Iran They are another sign of growing fragmentation.

In recent months, other smaller players have joined Yemen, Hamas, Azerbaijan and VenezuelaThey try Change the installed ordersaid Courtney Rickard McCaffrey, a geopolitical analyst at EY-Parthenon and author of the latest report.

“Even if these conflicts are minor, they can still affect global supply chains in unexpected ways,” he said. “Geopolitical power is dissipating,” and that contributes to instability.

Houthi attacks on ships around the world in the Bab el-Mandeb strait (known as the Gate of Tears) in the southern part of the Red Sea have raised cargo and insurance rates and oil prices, while affecting shipping. will be diverted to a much longer and more expensive route around Africa.

Last week, the United States indicated that it would expand a military alliance to guarantee the safety of ships passing through the trade route. It is the biggest diversion of global trade since Russia's invasion of Ukraine in February 2022.

“Sustained volatility in geopolitical and geoeconomic relations between major economies remains a major concern for risk managers in the public and private sectors,” the World Economic Forum's mid-year survey revealed.

With ongoing military conflicts, increasing extreme weather and several key elections looming, 2024 is likely to bring more of the same.

© The New York Times 2023