(9 January 2024 – Australia) Eurasia Group and The Australian Financial Review have published bold predictions for 2024 from the US presidency race, global elections, the Gaza conflict, Ukraine war, taming inflation and global interest rate settings.
US Presidency and Global Election Races
One-third of the global population will vote for new national governments in 2024 however an enormously dysfunctional US election will be by far the most consequential for the world's security, stability, and economic outlook the Eurasia Group reports.
The world's most powerful country and largest economy faces critical challenges to its core political institutions such as free and fair elections, the peaceful transfer of power and the checks and balances provided by the separation of powers.
“Predicting Donald Trump to win the 2024 presidential election is a fool’s game. If he wins, he will set a record, with only one US president having successfully staged a re-election comeback after being ousted from office – Grover Cleveland in 1892. The polls have Trump ahead of President Joe Biden by an average of 2.2 points, but polls can be useless; a fortnight out from the 2016 election, they had Hillary Clinton 12 points ahead of Trump” – Matthew Cranston, AFR United States correspondent
Gaza Conflict
There's no obvious way to end the fighting, and whatever the military outcome, a dramatic increase in radicalisation is guaranteed.
How much of an impact will the conflict continue to exert on associated tensions such as Red Sea container traffic and blocking of the Suez Canal by Houthi rebels operating from Yemen?
“Will Israel rule the Gaza strip by the end of 2024? No. But it will remain in occupation of Gaza and the West Bank, rendering peace elusive. So, the violence will continue until each side exhausts the other – but whether that exhaustion leads each to a reassessment of what is primary to their respective interests and identity is a critical question not just for 2024, but for the longer term” – James Curran, AFR international editor.
Russia & Ukraine Conflict
The Russia-Ukraine conflict is getting worse. Ukraine now stands to lose significant international interest and support. For the United States in particular, it's become a distant second (and increasingly third or lower) policy priority. The conflict is more likely to escalate, and Ukraine is on a path to being partitioned.
“There is unlikely to be a ceasefire, or a military breakthrough for either side. The main reason a ceasefire might happen is if Ukrainian President Volodymyr Zelensky runs out of weapons, thanks to US reluctance and European incompetence, or if his Western backers run out of patience” – Hans van Leeuwen, AFR Europe correspondent.
Controlling Inflation and Interest Rate Settings
High interest rates caused by stubborn inflation will slow growth around the world. With macroeconomic policy buffers largely exhausted, governments will have limited scope to stimulate growth or respond to shocks, heightening the risk of financial stress, social unrest, and political instability.
“If there’s one prediction that is consistently fluffed, it’s the direction of where interest rates are heading. The markets are forecasting the cash rate to end 2024 at 3.85 percent, implying 50 basis points of cuts in the cash rate” – Jonathan Shapiro, AFR senior banking and finance reporter.
“Getting inflation down from a peak of about 8 per cent in late 2022 to 5 per cent in late 2023 was the easy bit of the inflation reduction task. Even based on the RBA’s forecasts, inflation will only scrape below 3 per cent in late 2025, which may be optimistic. Services inflation in labour-intensive industries is proving sticky. The last mile of the inflation fight will be the hardest” – John Kehoe, AFR economics editor.
2023 in Review and Outlook Backtest
“The big unknown at the outset of 2023 was the state of the economy, and cost of living pressures, which have increased for many Australians. Interest rates increased five times in 12 months, inflation proved hard to tame, and Prime Minister Anthony Albanese has seen his popularity take a hit” – Ingrid Fuary-Wagner, AFR’s explainer editor.
The AFR was correct on 13 of 20 predictions for major financial news events in 2023, for example incorrectly calling that property prices would not rise.
Eurasia Group Top Risks for 2024: https://www.eurasiagroup.net/issues/top-risks-2024?utm_source=pocket_saves
For the 2024 Outlook you can take on the AFR by providing your own answers by clicking the link: https://docs.google.com/forms/d/e/1FAIpQLSc0yJ-8rV-p1imQKIPc_ilQ4vUqmj5-Qx_K2flU7T7v46ZzRQ/viewform?pli=1