All eyes on flurry of global elections

Premised on this, the markets may also be in the process of pricing in the possibility of a return of Donald Trump as the next US president.

“The political calendar year in 2024 will be busy, with more than 70 elections scheduled including in Indonesia, India and the United States, just to name a few.

“While it would be prudent to attach some election risk premiums, especially if drama and uncertainties emerge the Indonesian presidential election, for instance, may drag till June 2024 if there is no outright winner in the first round,” Ling said.

She was speaking at a presentation on the 2024 economic outlook for Malaysia and globally.

“Increasingly, our clients have also started to ponder if we will see a Trump redux come November 2024 since some key swing states appear to be swinging his way.

“This, in turn, could have policy implications for US-China trade, investment and industrial strategies,” she added.

Despite any possible global uncertainty on this front, Ling said the ringgit is expected to see a recovery from present levels to RM4.54-RM4.58 per dollar, as expectations are that the US Federal Reserve interest rates will be cut with lower treasury yields.

The strengthening of the ringgit will be supported by an eventual stabilisation of China’s economy and inbound tourism into Malaysia from there.

“Improved domestic fundamentals will remain supportive of the ringgit,” she said.

Meanwhile, she said food inflation is a lot higher than what many perceive to be despite headline inflation figures seen to be in control.

“While private consumption has been fairly healthy, inflation is still a bugbear, especially for the lower to middle-class Malaysians.

“Nominal wages are not keeping pace with inflation and the headlines suggest that the inflation looks quite mild but I think it is a lot higher than what the headline would suggest,” she said.

Ling expects cost of living issues will continue to be a matter of concern for Malaysians in the mid to low-income earners for now.

She also said business costs are still expected to rise despite a shifting of global supply chains as companies look for alternatives to China’s manufacturing base.

“To a certain extent, these higher business costs will be passed down to consumers eventually,” Ling said.

Meanwhile, she noted that geopolitics will continue to be a risk factor to contend with from the prevailing US-China tensions, which seem calm now but may be masking a deep undercurrent.

“Although the US-China tensions seem to have taken a breather since November, underlying stresses persist and periodic tensions cannot be ruled out as we head into the US presidential elections.

“Also, the Russia-Ukraine war is dragging on and the US administration’s financial assistance to Ukraine may be running into potential speedbumps,” Ling said.

She added that the Israel-Hamas war has potential global consequences, with a contagion to the rest of the Middle East remaining a risk that could potentially disrupt global oil markets and supply chains.

Ling noted that any prolonged and pronounced crisis in the Middle East could potentially play out differently for inflation expectations eventually.

“If inflation is adversely impacted, then this could in turn complicate the picture for central banks, which were positioning for a pivot to potential monetary policy easing later this year,” she said.

Daniel Khoo

The Star

Asia News Network