Several weeks into 2024, the consensus forecast for the global economy remains cautiously optimistic, with most central banks and analysts projecting either a soft landing or potentially no landing at all. Even my colleague Nouriel Roubini, famous for his bearish tilt, regards the worst-case scenarios as the least likely to materialize.
In a crucial election year in which voters in dozens of countries — representing half the world’s population — will head to the polls, government spending is already expected to surge. In macroeconomics, this phenomenon is known as “political budget cycles”: Incumbent politicians want to stimulate the economy to improve their chances of being re-elected, so they increase public spending and run larger deficits.
GDP growth figures have long been a politically charged issue in China, particularly over the past year, as President Xi Jinping consolidated his one-man rule by sacking numerous top officials, including his defense and foreign ministers. With the Chinese economy grappling with deflation, falling property prices and weak demand, it is increasingly evident that its economic woes are far from over — and that Xi is determined to control the narrative.
Nevertheless, Biden’s trade protectionism is mild compared to Trump’s plan to impose a 10% tariff on virtually all imported goods, a move that could wreak havoc on the global trading system. European countries are understandably rooting for Biden, who — unlike Trump — has repeatedly reaffirmed his commitment to reining in Russian expansionism.