Jim Power: Potentially seismic political developments to influence global economics in 2024

The central scenario seems to be that inflationary pressures will continue to gradually ease, but it is unlikely to be a smooth path as tight labour markets continue to pressurise services sector inflation

'If Donald Trump manages to make it to the starting line, there is every chance he could become the next US president,' writes Jim Power. Picture: Andrew Kelly via AP

We have learned to our cost in recent years that political actions can have significant economic and financial consequences. 

Brexit, the election of Donald Trump, and Vladimir Putin’s illegal invasion of Ukraine all provide extreme examples of political actions that had and continue to have profound economic implications. 

In that context, the year ahead promises to be incredibly interesting and potentially risky from both a political and economic perspective.

Unfortunately, as we move into the new year, the war in Ukraine is showing no sign of abating or reaching a conclusion. Putin always believed the West would eventually lose interest, particularly financial interest, in Ukraine.

The US Congress failed to agree a funding package for Ukraine; the Irish Government introduced measures to change the treatment of Ukrainian refugees; and the enthusiasm many EU countries had for helping Ukraine in the face of a savage and illegal invasion appears to be waning. 

This is unfortunate because it seems clear that if Putin succeeds in Ukraine, there is no limit to what he might try next. It is essential for global political stability that every possible resource is devoted to ensuring Putin’s savage adventure ends in defeat.

Meanwhile, the Taoiseach got quite a bit of criticism over his earlier comments about the Israeli attacks on Gaza and the slaughter of many thousands of innocent Palestinians, but there is a growing international sense that Leo Varadkar was spot on. 

What Hamas did was savage and deranged, but the Israeli response is now turning into mass murder of many innocent women and children. The longer-term implications of what the leader of Israel, Benjamin Netanyahu, is now doing will not bring peace and stability to the region.

Several significant elections

On the election front, there are several very significant elections in 2024. The election in Taiwan in January is first up. From a global geo-political perspective, the relationship between China and the US will be the defining one over the coming decades, just as the relationship between the US and the USSR was up to 1990. 

Strategically, Taiwan is the most dangerous and immediate threat to that relationship. If, over the next three or four years, China decides to invade Taiwan, which many people believe president Xi Jinping is planning, then the US will have to get involved and God only knows what might happen from there.

There are elections to the European Parliament in June. The most interesting thing to watch in those elections will be the performance of the far-right, who are intent on destabilising the EU model. 

In Ireland, the European elections and the local elections in the same month will be watched closely for the economic manifesto and performance of Sinn Féin. Of course, a general election must be held by March 2025.

The most significant election of the lot, however, will be the US presidential election in November. If Trump manages to make it to the starting line, there is every chance he could become the next US president. 

Such an outcome would have huge implications for the global economic order as barriers to trade in the shape of high tariffs and even more intense economic nationalism would likely become the order of the day, not to mention his attitude towards Russia, China, and the EU.

All in all, it looks as if global economics will be heavily influenced by potentially seismic political developments over the coming year.

The central scenario seems to be that inflationary pressures will continue to ease, but it is unlikely to be a smooth path as tight labour markets continue to pressurise services sector inflation; that economic activity in the euro area and the UK will continue to bounce along the bottom, and the US will perform somewhat better; that China will recover somewhat on the back of strong public intervention; and that central bankers will start to cut interest rates at some stage.

For Ireland, the performance of the multinational export sector and corporation tax receipts will have to be watched carefully.

Jim Power is a leading Irish economist