By Satyam KumarVoters will choose a new government in several countries across the world this year, in 2024. These elections could shape the global economy and geopolitics for years to come.
This year’s election-bound countries represent nearly half of the world's population and Gross Domestic Product (GDP). We take a closer look at how these countries have been performing in the lead-up to the polls.
India’s flagship index is up 2.5X in the past four years, US and Japan indices double
India is gearing up for its Lok Sabha elections in April-May this year. The current ruling party, the Modi-led Bharatiya Janata Party (BJP), is the frontrunner in the polls and is looking for a third term. The BJP government has spent Rs 23 lakh crore on infrastructure in the past three years (FY22-24) as part of the ‘Infra Push’. It has also implemented various production-linked incentive (PLI) schemes to encourage manufacturing in the country. Additionally, reforms to enhance the ease of doing business and initiatives to bolster manufacturing have added to India's growth.
India’s young population overtook that of China’s last year. With over 66% of its population of working age (between 18 and 64 years old), India has a rare demographic dividend that will help it produce goods at a faster pace, and drive technological innovation. The 'China-plus-one' strategy could also benefit India as companies worldwide seek to reduce their dependence on Chinese players.
India’s GDP growth rate came in at 7.5% in 2023, the highest among major economies. The nation’s flagship index, Nifty 50, delivered returns of 162% over four years, outperforming all other major global indices. The country’s GDP growth has been stable for the past five years, except during the Covid period when it declined by 5.8%.
Japan's Nikkei 225 hits a new peak
Japan’s Nikkei 225 made a new all-time high after 34 years crossing 40,000 yen for the first time on March 4, as global investors bet on a long-overdue recovery from deflation. In 2023, Japan witnessed a GDP growth of 1.9%, improving on 2022’s 1% increase. Its benchmark index, Nikkei 225, has risen by 41% over the past year and by 110% over the past four years, led by strong earnings. A key driver for this rebound is inflation, and the country’s expected exit from negative rates later this year.
In December 2023, three Japanese government ministers stepped down amid a corruption scandal involving alleged kickbacks of 500 million yen ($3.4 million) in the Liberal Democratic Party. Following this, there's been speculation about a general election later this year after the party's leadership vote in September.
US sees resilient growth, but faces sticky inflation and high interest rates
Coming to the largest democracy in terms of GDP, the United States witnessed GDP growth expansion in 2023 at 2.5%, compared to 1.9% in 2022. This growth came even though the Federal Reserve has been raising interest rates since March 2022. Most of the country’s stock rally in 2023 came from the Magnificient Seven. They made up about two-thirds of the S&P 500's gains last year. Top gainer Nvidia is up 370% since the start of 2023. S&P 500 has posted 98% returns in over four years. It also rose 26.4% last year, boosted by optimism around artificial intelligence and Fed rate cuts. The Fed has indicated that it’ll cut rates later this year, as they see inflation falling below 2%.
The US presidential election, scheduled for November 5 this year, will be a rematch between the current Democratic President Joe Biden, and former President Donald Trump. The sniping between the two candidates is already well underway, with Biden attacking Trump numerous times last week in his State of the Union address, and Trump using various Instagram filters on Biden’s face in his response.
GDP growth slows in European region, UK faces mild recession
The European Union (EU) has seen a decline in GDP growth over the past two years due to high inflation and reduced demand. In 2023, the EU’s GDP growth rate was only 0.4%. As a result, equity market returns moderated, with the Eurostoxx 600 rising 8.2% in the past year and 57% over four years. The European Central Bank has kept interest rates unchanged at 4.5% to reduce inflation below 2%. The European Parliament election is scheduled from June 6 to 9 this year.
Similarly, the United Kingdom’s (UK) GDP growth slowed down to 0.1% in 2023 from 4.3% the previous year. As a result, the FTSE 100, UK’s flagship index, fell by 3.6% over the past year. It rose by 35% over four years. Markets took a hit last year as the UK slipped into a mild recession in the second half of 2023.
The general election in the UK is scheduled for January 28, 2025, after the Parliament dissolves on December 17, 2024. However, Prime Minister Rishi Sunak recently said: "My working assumption is we'll have a general election in the second half of this year."
Mexico’s benchmark index delivers 59% returns over 4 years, South Africa struggles
Mexico’s GDP growth slowed to 3.2% in 2023, down from 3.9% the previous year. Its benchmark index, IPC Mexico, has delivered 59% returns over four years, in line with other economies with contracting GDP growth. Over the past year, the index has seen a marginal increase of 1.5%. Its general elections are set for June 2.
South Africa will face general elections on May 29, which may see the African National Congress lose its majority for the first time. Its GDP growth dropped from 1.9% in 2022 to 0.6% in 2023. The economic downturn is evident in its flagship index, South Africa Top 40, which declined 7% over the past year.
South Korea, one of the fastest-aging countries in the world, will conduct its legislative election on April 10. The election is crucial for ruling President Yoon Suk Yeol, as it marks the midpoint of his tenure. The country’s GDP growth has been declining for the past two years, at 2.6% in 2022 and 1.4% in 2023, compared to a growth of 4.3% in 2021. The nation’s flagship index KOSPI delivered moderate returns of 10.9% last year and 52% over four years.
In the run-up to elections, economies with falling inflation and healthy GDP growth have seen resilient markets.
On the other hand, struggling economies like the UK and South Africa have seen weak sentiment in their markets. India shines, with its strong domestic consumption and high GDP growth. A single-party win in the upcoming elections would be a boost for investors.
