Author: Paul Della Guardia

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Emerging Markets Geopolitics

Trump’s red wave puts emerging markets under water

Double-whammy of higher U.S. yields and stronger dollar, with peak deglobalization still to come

Most people think my newsletter is only about sovereign debt.

This is a fair assumption: after all, “sovereign” is in the name.

But it’s also about deglobalization, geoeconomic fragmentation, slowbalization.

Or whatever other convoluted term you want to label the post-2016 Trump victory 1.0 and Brexit world as.

I write about these topics as well because they are so closely intertwined with what is happening in the emerging markets and sovereign debt space.

The daily symptoms of this world are often sanctions and tariffs, or any other number of phenomena that harden borders and disintegrate international relationships.

And it’s this reigning ambiance that also led me to call this newsletter “Sovereign Vibe.”

Countries are turning inward, putting themselves first, and promoting isolationist and protectionist policies in one form or another.

It’s sovereign first, friends next, enemies last, and multilateralism forgotten.

Never has that been more true than after Trump’s sweeping 2024 electoral triumph, carrying the U.S. popular vote and a strong mandate for “America First” policies.

Buckle up: we’re going to be in for a wild four years and beyond…

Exporters at risk

With Trump proposing 60% tariffs on imports from China and 10-20% on imports from the rest of the world, countries with a heavy reliance on exports are at risk.

This is especially true for countries with direct export exposure to the U.S., though interconnected global supply chains means that countries with high shares of exports to GDP may be particularly vulnerable.

While Trump’s trade policies may take aim mainly at manufactured goods, it is unclear the extent to which they will target services and raw materials.

The charts below break down export exposure by region:

Fed rate-cutting

The conditions were supposed to be favorable to emerging markets.

The beginning of a Fed rate-cutting cycle is reliably a good omen for the EM universe.

Lower U.S. yields mean lower yields for EM debt, especially if it is dollar-denominated.

While lower borrowing rates for EMs assumes spreads remain somewhat steady when U.S. rates are lower, in any case the effect of lower U.S. rates helps drive capital flows towards EM.

Trump trades in full swing

But Trump’s victory has just blown that narrative out of the water.

Sure, U.S. yields were already rising in October on the back of strong non-farm payroll data and robust economic growth, though this was tempered by weak jobs data late last week.

Yet the market reaction has pushed U.S. yields up further across the yield curve, in a bear steepening, which sees long-term rates rise fastest.

This means that markets expect increases in:

  • nominal growth & inflation: as a result of lower taxes, higher spending and higher fiscal deficits.
  • uncertainty: due to policy volatility, including on trade tariffs, hence the higher term premium at the longer end of the curve.

Meanwhile, other “Trump Trades” are in full swing: U.S. stocks, the USD, and Bitcoin are all up.

EM under pressure

In this new higher-U.S.-yield, stronger-USD environment, EM currencies have taken a battering in the immediate aftermath of the election result.

The broad EM currency index registered its largest daily loss since early 2023, with the Mexican peso and Eastern European currencies suffering.

Asian equities pulled down the MSCI EM equity index by 0.7% on November 6th, as market participants evaluated the impact of Trump’s tariff policies.

Hong Kong equities dropped by some 2.5%.

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Sovereign Debt

Emerging economies adrift in a high-debt world

With global public debt at $100 trillion, many countries need more IMF-World Bank help.

Now that the dust has settled over last week’s IMF-World Bank Annual Meetings here in Washington, D.C., I can’t help but feel underwhelmed.

The meetings have achieved only incremental progress at a time when bold measures are needed to foster growth, eradicate poverty, and achieve the United Nations’ Sustainable Development Goals.

IMF Managing Director Kristalina Georgieva speaking at IMF HQ1 on October 24th, 2024 in Washington, D.C. Credit: Paul Della Guardia

Outcomes

Some of the Meetings’ chief outcomes include:

  • The IMF Executive Board has reformed the charges, surcharges, and commitment fees that will lower the cost of borrowing for member countries by some $1.2 billion annually.
  • The G20 finance ministers and central bank governors have committed to a roadmap for building larger multilateral development banks.
  • The IMF has introduced a new “debt-at-risk” framework that assesses how changing economic, financial, and political conditions can alter the distribution of debt-to-GDP ratios in the future.
  • The prospects of providing the International Development Association with a record $100 billion replenishment later this year remain uncertain, amid competing policy visions and domestic fiscal pressures for donors.

Heavy debt burdens

I am far from the only participant who has been left nonplussed by the world’s premier global economic event.

None other than the U.S. Treasury is now pressuring the World Bank, IMF, and other international financial institutions to do more to help poor countries manage heavy debt burdens and handle punishing debt repayments over the next few years.

Global public debt now stands at around $100 trillion, with debt ratios having grown significantly in developing economies.

In 2013, only 6 African countries had debt-to-GDP ratios above 60%, whereas that figure has now risen to 27.

EM local currency sovereign spreads

The payment pressures that EM government borrowers face are real, both for low- and middle-income countries, though relief may come through the recently-begun Fed interest rate-cutting cycle.

Local currency bond spreads over U.S. Treasuries underscore the divergences in borrowing costs in the EM universe, while also reflecting domestic capital market development.

Spreads on Indian and Indonesian 10-year local currency bonds have declined significantly in recent years, to only 250 basis points, on the back of robust growth and sound economic policy.

Turkey has been grappling with inflation above 50%, hence the large nominal borrowing costs in lira.

Similarly, spreads on Brazilian 10-year sovereign bonds are also elevated this year amid perceptions of fiscal risks.

The same has been true in 2024 for Mexico, albeit to a lesser degree, as investors worry over the new Sheinbaum administration’s left-wing spending plans.

South African spreads have declined following the June election that brought the ruling African National Congress into a coalition with the center-right, market-friendly Democratic Alliance party.

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Geopolitics Macro

Rising uncertainty fails to rattle global markets

High economic-political uncertainty paired with low volatility amplifies market risks

In its recently-released Global Financial Stability Report, the IMF warns that the disconnect between rising economic and geopolitical uncertainty and low financial volatility increases market risks.

The CBOE Volatility Index – a barometer of equity market volatility – has remained at or below 20 for much of 2024.

The IMF’s warning is in keeping with an April 2024 edition of this newsletter, “Are markets underpricing geopolitical risks?”

August volatility

The sole exception to this low volatility occurred in early August, when the Bank of Japan spooked markets with an unexpected interest rate hike.

This surprise unwound massive carry trade positions from the yen into assets denominated in emerging market currencies, causing the VIX to surge.

Carry trades involve borrowing in a low-interest rate currency to invest in a high-interest rate currency.

Kazuo Ueda has been serving as the Bank of Japan’s Governor since April 2023. FT montage/Bloomberg

Threats to lofty valuations

This year credit and equity markets have remained strong despite slowing earnings growth and rising fragilities in parts of the corporate and commercial real estate sectors.

Amid already-lofty valuations, there are concerns that, as many central banks pursue their easing cycles, interest rate cuts could lead to asset bubbles and rises in private and government debt and non-bank leverage.

The Fund underscores the uncertainties around military conflicts and the future policies of newly elected governments – in a nod to the many elections in 2024, including in the U.S.

Yet this year only a monetary policy event – i.e. the BoJ-carry trade de-leveraging – has caused volatility to rise, rather than any military or political factors.

While some military or political factors could roil markets, economic policy surprises and threats to corporate and household resilience could just as easily cause volatility to surge.

Sudan’s brutal but forgotten civil war has affected Egypt’s economy but has otherwise had a negligible economic impact beyond its borders. AFP

VIX-equity market correlations

Regardless of what causes equity market volatility, seeing how emerging country equity markets are correlated with VIX yields some clues as to which countries are more vulnerable.

To do this, I compare daily changes in VIX to daily MSCI index returns and smooth that data out over a 90-day period.

These VIX-MSCI correlations are generally negative, as expected, meaning that a rise in volatility is associated with a decline in daily returns.

The relationships are naturally dynamic over time, given the presence of idiosyncratic market drivers in each country and the varying sources of global market volatility.

CEEMEA

Looking across the three EM regions, in CEEMEA Egypt currently appears less negatively-correlated – and therefore less vulnerable – to VIX.

In all five countries, the negative VIX correlations dropped to nearly -0.75 during the first wave of the pandemic in H1 2020, underscoring the risk to EMs from global vol.

EM Asia

In EM Asia, Korean and Malaysian equity markets appear most at risk from changes in VIX.

We can’t really ascribe it solely to them being small, open economies, as their VIX correlations aren’t systematically more negative than their larger regional peers.

But certainly something about the current environment – whether global or local – is causing these correlations to be at -0.6, which points to significant VIX vulnerability.

LatAm

As for LatAm, Mexico and Chile stocks are most exposed to global vol.

Their equity market correlations with volatility are around -0.5, meaning they seem to face less VIX risk than Malaysia or Korea but more than any of the CEEMEA countries.

Categories
Emerging Markets Macro

Which emerging markets have an inflation problem?

Rampant inflation is most prevalent in lower-middle income countries, except for Argentina and Turkey.

A recent piece by the ex-head of EM economics at Citi, David Lubin, ponders inflation risk in emerging markets, citing fiscal indiscipline as a major threat to price stability.

So I wanted to visualize cross-country IMF forecasts for EM inflation in 2024 and juxtapose that to see how it tracks with what Lubin is saying.

He mentions South Africa (~4.5%) and Hungary (3.7%) as success stories in reining inflation in to target. In contrast, Lubin notes that Brazil (~4%) and Turkey (~60%) have fiscal policies that are too loose.

Though I would add that South Africa didn’t exactly implement an austerity program in the run-up to its general election in June.

The Fed’s easing cycle and increasing Chinese market share in global exports are both disinflationary forces for EMs, whose battles against inflation could benefit from these benign external forces.

Upper-middle income EMs

In the upper-middle income group of EMs, South Africa and Brazil hardly stand out as particularly successful or unsuccessful in tackling inflation, respectively. Not least because the former has higher inflation numbers than the latter.

Lubin is of course right about Turkey being too expansionary in its fiscal policy, with a potential crisis brewing. According to Lubin, on the monetary front, one issue is that the central bank is under too much pressure to maintain exchange rate stability.

While inflation remains reasonably low in Mexico, Lubin is right to point out the fiscal discipline risks in Mexico, given early indications of new president Claudia Sheinbaum’s policies.

Argentina is in the reverse situation compared to Mexico, with already-rampant inflation (250%!) but leadership that has balanced the budget.

Lower-middle income EMs

Unsurprisingly, inflation is much higher in this poorer sample of countries. Only a handful have inflation rates below 5%.

Lubin notes that fiscal discipline is a risk in Indonesia, though it does have one of the lowest inflation levels in this category.

Though I am surprised to see that Indonesia – and India – are lower-middle income. I’d had them pegged as upper-middle income, given their prominence in the EM universe.

Let’s chalk that up to how confusing the EM asset class is. I get that both countries have large populations, but I thought they would have “emerged” more by now. Thankfully, growth is strong in these two Asian nations.

High income EMs

Overall inflation rates are much lower in this group. Romania comes in highest, at a mere 6%.

These are truly developed-country CPI readings, providing yet more reason to abandon the EM designation altogether. Many of these countries have little in common with each other.

Lubin points to potential fiscal indiscipline risks in Poland, which indeed has higher inflation than a more “successful-according-to-Lubin” Hungary.

Categories
Emerging Markets Sovereign Debt

Volatile US Treasuries spell trouble for emerging market debt

The Fed’s data-dependence is clouding EM’s mostly-benign cutting cycle outlook.

Investor expectations of Fed policy and the resulting impact on US Treasury yields is increasingly affecting emerging market debt, as markets lurch from one narrative to another in response to data releases.

Volatility in the US Treasury market has surged since last Friday’s blockbuster US non-farm payrolls report, with investors expecting the Fed to slow the rate-cutting cycle.

The strong print dashed hopes of a second large cut at the Fed’s meeting in November, which had risen in the wake of the landmark 50 basis point decrease on September 18th.

This reversal sent US 10-year Treasuries above the 4% mark, while also placing upward pressure on EM local currency yields so far in October.

This month, ten-year yields are trending higher in India, Indonesia, South Africa (despite a recent rate cut), Mexico, and Colombia. Only Brazil has seen its long-term borrowing costs decline, although these remain elevated.

Mixed picture: today’s US macro data release

Today’s US data release of headline CPI declining to 2.4% in September could place upward pressure on US Treasury yields, as it was above the consensus forecast of 2.3%.

Moreover, core inflation also came in above economists’ expectations, at 3.3%.

On the other hand, US unemployment insurance filings beat the forecast number by 30,000, having risen to 258,000. This is the largest weekly increase this year, supporting the case for monetary policy easing.

In early trading, the two-year Treasury yield has remained stable, at slightly above 4%.

EM and Treasury yields are tightly correlated

Since August, EM sovereign yield correlations to US Treasuries have increased.

Looking at this relationship over a three-month rolling window, this tighter link has benefited EM government issuers.

Indeed, their borrowing costs were declining until end-September, except in the case of Brazil (see first chart above).

And since October 3’s large NFP figure, all seven in-sample EMs have seen their weekly yield correlations to US Treasuries turn positive.

Moreover, 10-year local currency government bonds in Brazil, India, and Indonesia have recorded positive weekly correlations with 10-year Treasuries of 0.75 or above.

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Geopolitics

Should investors worry about Israel-Iran?

The recent escalation presents downside market risks, albeit these are limited.

Brent oil prices have risen quickly this week to reach $74.92 per barrel at the time of writing on Thursday, reflecting concerns at potential disruption to Iranian supply.

Market participants see a non-zero chance of Israel targeting Iran’s oil facilities in response to over 180 Iranian missiles fired towards its territory.

April 2024 redux

Today’s situation contrasts with the Iran-Israel missile and drone strikes in mid-April 2024. These didn’t cause oil prices to increase, given Israel’s muted response at the time.

In fact, April prices decreased on the back of slower US business activity and limited concerns over the Middle East.

The difference this time is clearly Netanyahu’s willingness to use a more aggressive approach against Lebanon and Iran, justifying rising prices.

Limited fallout

The conflict has yet to spill over to the broader Persian Gulf, which would be a driver for a larger jump in prices.

In the meantime, OPEC+ cuts to production in recent years have resulted in 5 million barrels per day of excess capacity, which could be restored in case of Iranian supply disruptions.

Although these Middle East tensions have shown some signs of dampening investor risk sentiment over the past week, the effect has been limited.

Over the past week, the S&P500 is down marginally, and the dollar index has strengthened, both of which are consistent with a risk-off mood.

As for other havens, these haven’t moved in a risk-off direction. US Treasury yields are up (on the back of strong payrolls), the yen has weakened, and gold has traded flat.

Stay focused on policy, macro data, and earnings

For all these reasons, investors shouldn’t worry too much about the Israel-Lebanon/Iran disrupting markets much beyond what may be a temporary surge in oil prices.

As is usually the case, monetary and fiscal policy, macroeconomic data releases, and earnings reports will drive market reactions more than politics or geopolitics.

For instance, in the US, jobless claims, Purchasing Managers’ Index reports, services activity data, and the non-farm payrolls report are all due to be released this week.

These will affect markets much more than the Israel-Iran situation, given the need to position around the path of Fed policy in the rate-cutting cycle that began last month.

China’s recent stimulus package is another case in point. Last week the People’s Bank of China announced rate cuts on mortgages and reserve requirements, in addition to a $114 billion facility to fund stock purchases.

These are designed to support the distressed real estate market and reverse deflation. Local equity markets reacted with the single largest daily gain since 2008, even though the impact of these measures on earnings is of course yet to be seen.

In any case, the geopolitical tensions around a Japanese destroyer sailing through the Taiwan Strait were barely felt in markets last week despite the China’s fuming response and putting its military on “high alert.”

Categories
Emerging Markets Sovereign Debt

Sri Lanka Election: Any Port in a Storm

Markets cautious on newly-elected President Dissanayake, renegotiations.

In one of Sri Lanka’s greatest political shake-ups in decades, this weekend’s presidential election saw the victory of neo-Marxist Anura Kumara Dissanayake ahead of the country’s two main, established parties.

With the political establishment now swept away, Dissanayake now faces the arduous task of consolidating the economic recovery and setting public finances on a sustainable, growth-inducing trajectory. 

Political Thunderbolt

Markets have had a mixed reaction to Anura Dissanayake’s victory in Sri Lanka’s presidential election over the weekend.

The bond market reaction has been fairly predictable for the election of a neo-Marxist, with Sri Lankan government yields sent soaring. 

There are concerns that Dissanayake’s neo-Marxist leanings will lead to renegotiations of provisional debt restructuring deals and may even call some IMF conditionality into question.

Yields are also up over market uncertainty around how the new president and his party will govern, and whether that will threaten reform momentum.

The situation is fluid, with Dissanayake having dissolved parliament yesterday, where his party only holds three seats.

An End to Corrupt Rule?

There are some reasons to be hopeful. Local equities have been rising this week.

This could be related to the potential end to corrupt rule in the country and, with any luck, a pivot towards more transparent, inclusive governance and the stability that brings.

President Anura Kumara Dissanayake; Eranga Jayawardena/Associated Press

It’s easy to forget that what matters for governance is inclusivity, rather than focusing excessively on the left-right political spectrum.

The deeply-corrupt Rajapaksa dynasty was more market-friendly than Dissanayake on the surface.

But it was the endemic clientelism under their rule that led the country over the brink of default.

More than anything, this electoral result has been the repudiation of long-standing patronage networks.

As such, it should give investors hope for improved macroeconomic stability and public financial management.

If Dissanayake and his team manage to avoid measures that are excessively punitive for investors and businesses, including SMEs, brighter days may well be ahead for Sri Lanka and its stakeholders.

A Silver Lining to Renegotiations?

Moreover, there could be a silver lining to revising provisional debt restructuring agreements.

The bondholder deal is problematic as it is, as the macro-linked bonds will increase Sri Lanka’s future coupon payments if nominal dollar GDP rises beyond a certain threshold.

The macro-linked instruments are supposed to reflect strong growth.

But merely a strong currency appreciation that pushes GDP in nominal USD above the threshold, rather than rising output, could trigger the step-up.

Categories
Emerging Markets Macro Sovereign Debt

Is the Washington Consensus Dead?

Small island states and large emerging markets have the biggest budget deficits in 2024.

So this week I wanted to take a quick look at how our beloved emerging and frontier markets compare fiscally .

In today’s newsletter I’m only showing you overall budget balances as a starting point. This is part of a larger deep-dive cross-country fiscal comparison that I’m working on.

As I’ve done previously, I segment the countries by income level, into upper-middle and lower-income groups. Here I rely on the IMF’s World Economic Outlook April 2024 database, using the forecasts for the current year.

Small Island States & “Big EM”

The first thing that stands out when comparing the upper-middle (first chart) and lower-income (second chart) country groups is that “only” one UMIC – the Maldives – has a budget deficit at or below -10%/GDP.

In contrast, five LMICs – Timor-Leste, Kiribati, Ukraine, Egypt, Zimbabwe – are at or below this threshold.

No wonder the Maldives is currently on the hunt for a bailout to avoid the first-ever sovereign default on an Islamic bond.

And taken together, these charts both underscore the frailties of small-island states. In addition to the ones mentioned above: St. Vincent, Tonga, Fiji, and Vanuatu also have yawning budget deficits.

The Washington Consensus

These lists are also noteworthy for the presence of large deficits in large emerging markets keen to use their borrowing power. Chief among them is China at -7.4%/GDP, followed by Brazil, South Africa, Mexico, and Turkey.

Though by now it’s fair to say that the Washington Consensus principle of fiscal discipline is effectively dead, with the US on track to run a -7%/GDP fiscal shortfall this year.

Among large emerging markets, only China is more profligate. Unlike the US, however, it is trying to spend its way out of an economic slump.

So for any countries out there in need of an IMF program, the message is “do as I say, not as I do” when told to rein in their government spending.

A Positive Note?

Not really, unless Jamaica or a chainsaw counts. The countries that run fiscal surpluses have one or more of the following characteristics:

  • Mineral wealth: Equatorial Guinea, Libya, Turkmenistan, Republic of Congo, Angola, Turkmenistan, Mongolia
  • Small islands with no borrowing power: Haiti, Lesotho, Tuvalu, Palau, Grenada, Micronesia, São Tomé and Príncipe
  • Fiscal discipline: Jamaica, Argentina
Credit: AP Photo/Natacha Pisarenko
Categories
Emerging Markets

Where is emerging market growth fastest?

EM convergence to rich-world wealth levels is concentrated in Europe and Asia.

When I read a recent piece by Ruchir Sharma about a growth revival under way in emerging markets, I had to start investigating.

Apparently, a higher-than usual proportion of EMs (88%!) will have GDP per capita growth higher than the US in 2025-29, if IMF forecasts are anything to go by.

It seems that raw materials exports for green tech, an AI-related boom in chips and electronics, and ongoing re-shoring/friend-shoring of supply chains will be major drivers of EM resurgence. And that could well be.

My own view is that the winners and losers will be differentiated by which countries manage to move up value chains to the export of services and manufactured goods rather than natural resources.

That’s simple economic reasoning and far from contrarian. But it goes against the “Africa Rising” or “African Century” narrative that I so often hear.

Expect EM Asia ex-China, including India and ASEAN, to do continue doing well over going forward, though China will no longer be a main driver of that growth story.

EM Europe has also been overlooked as a bit of a dark horse but has posted some impressive wealth gains in recent years. And it’s poised to develop further.

For Africa, LatAm, and the Middle East & Central Asia, the future is somewhat cloudier. I’d even go so far as to say that I’m pessimistic on wealth creation keeping pace with breakneck demographic growth in Africa.

I’ve prepared some charts to help you visualize how the IMF’s data describes the past, present, and future of world regions in terms of:

  • average annual GDP growth; and
  • average annual GDP/capita growth, in purchasing power parity-adjusted constant 2017 US dollars.

2025-29: Looking Ahead

The charts below show how emerging economies in Asia, including ASEAN, are poised to grow quickly over the next five years. The outlook also seems promising for Africa and for emerging markets as a whole.

Conversely, the IMF forecasts weak GDP growth for advanced economies. Slow growth is nothing new in Western Europe, but a sluggish G7 points to a slowdown in the US economy.

This could well be, given currently-large US deficits are draining future resources for productive investment.

On the GDP per capita metric below, Africa is dead last in the IMF’s forecast.

Sure, since the levelof GDP per capita is lower in poor countries, a small dollar change is actually larger in percentage terms in Africa than the same dollar amount would be in a richer country.

Still, these GDP per capita numbers are adjusted for purchasing power and for inflation.

So a less-than-$100 increase in income annually on average over the next five years is abysmal, especially given the importance of combating poverty and migration crises.

The per capita GDP growth forecast also looks lackluster for the Middle East, Central Asia, and Latin America.

On the other hand, advanced economies and EM Europe look poised to benefit from the most average annual dollar wealth creation.

2020-24: The Pandemic & Its Aftermath

The past five years have have been rough, with the global economy suffering from the polycrisis of the Covid-19 pandemic, surging inflation, and conflicts in Ukraine and the Middle East.

Advanced economies, and especially Europe, have had the weakest average annual GDP growth, along with LatAm.

While it comes as no surprise that to see EM Asia at the top of the 2020-24 GDP growth list, EM Europe topping per capita GDP growth is surprising, given the war between Russia and Ukraine.

Africa managed nearly 3% average GDP growth during this period, so the continent is actually developing. But it is not doing so quickly enough to outpace its demographic boom, which is why it ranks last once again on GDP per capita growth.

It has been a challenging five years for most EM regions in terms of per capita GDP growth, while advanced economies have fared well.

2015-19: Looking Back

The latter half of the 2010s share some similarities with 2020-24:

  • EM Asia and ASEAN posted strong headline GDP growth.
  • All advanced economies experienced strong GDP/capita growth.
  • Africa and LatAm – and, to a lesser extent, the Middle East & Central Asia -fared worst on GDP/capita growth.
Categories
Emerging Markets

Right-wing populism on the rise in EM

2024: string of electoral victories for right-wing populists across emerging markets

Right-wing populism

In order to help you EM aficionados cut through the political news cycle noise, it’s necessary take a step back and think about the direction of travel of EM politics. Let’s not bury the lede: by my count, the political winds in 2024 are favoring populist right-wing parties above all else.

That’s not to say other political formations haven’t done well this year. Center-left parties are a case in point. As are authoritarians of different stripes.

But it is noteworthy that right-wing populists have enjoyed electoral victories across most EM regions year-to-date:

  • Europe: Slovakia, North Macedonia, Bulgaria, Poland
  • Asia: Indonesia, India
  • Latin America: Panama

Some caveats

The main center-left victories have come in Taiwan, Turkey, South Korea, and Mongolia. Mexico and South Africa also witnessed victories of left-wing populists with wide-ranging implications.

Now, victory does not equal improvement. For instance, India’s BJP and South Africa’s ANC “won” their general elections but secured far fewer seats than anticipated. In the latter case, the winner even had to enter into a coalition with rival party to form a government.

Authoritarians

For the authoritarian “victories” listed below, these have all come in various forms. The Awami League’s re-election in January has proven short-lived, with protests ousting the government in summer 2024.

The electoral situations in Venezuela, Chad, and Pakistan have their own idiosyncrasies but share at least one attribute: the results are anything but free and fair.

And the Kuwaiti emir’s penchant for dissolving and re-dissolving parliament is down right bizarre. Maybe he is competing with Bulgaria to host as many elections in short order as possible?

Where is the center-right?

Another feature of this year’s electoral results in EM is the seeming absence of any center-right victories.

There could possibly have been a few. But I haven’t gone through every single contest, having filtered for broadest possible relevance to the EM investor base (e.g. sorry Iraqi local elections, Madagascar parliamentary elections, Vanuatu constitutional referendum etc).

This could be a naming issue: are all so-called right-wing “populist” parties actually more “populist” than so-called center-left parties not branded as such?

Overview

Right-wing victories

  • Center-right: NA
  • Populist: Slovakia, North Macedonia, Bulgaria, Indonesia, Panama
    • Victory but weakened: India, Poland
  • Authoritarian: Pakistan, Kuwait, Chad

Left-wing victories:

  • Center-left: Taiwan, Turkey, South Korea, Mongolia
  • Populist: Mexico, Senegal
    • Victory but weakened: South Africa
  • Authoritarian: Bangladesh, Venezuela

April

Kuwait: Kuwaiti politics have been downright chaotic of late, with the emir having dissolved parliament in February following an alleged insult. This fourth election in four years resulted in the opposition retaining its majority, at least until the emir dissolved parliament – again – in May.

Slovakia: The populist, pro-Russian PM Robert Fico’s preferred presidential candidate, Peter Pellegrini, won the run-off for the largely-honorary role. Fico survived an assassination attempt in May, marking deep divisions within the country.

Poland: The nationalist, opposition PiS party came out ahead in local elections on April 7th, remaining the strongest party. But Prime Minister Tusk’s Civic Coalition experienced some gains, notably with more majorities in regional assemblies.

South Korea: The center-left DPK retained its hold on the most seats in the National Assembly and with its partner parties in the Democratic Alliance controls an absolute majority of seats. Its historic rival, the conservative PPP, holds the presidency.

Other: Croatia, Solomon Islands, Ecuador, Maldives.

May

South Africa: The ruling ANC party lost its outright parliamentary majority for the first time in the post-apartheid era. President Ramaphosa chose to enter a new coalition government with the center-right Democratic Alliance, a long-time rival party.

Panama: The center-right Realizing Goals-Alliance won the vote, bringing José Raúl Mulino to the presidency. Mulino has expressed skepticism around allegations detailed in the Panama Papers surrounding a variety of corrupt business practices allegedly facilitated by a local law firm.

North Macedonia: In a blow to the country’s EU integration prospects, the nationalist, right-wing party VMRO-DPMNE decisively won the parliamentary elections while its candidate, Gordana Siljanovska-Davkova, won the presidential elections on the same day.

Chad: Following the death of long-serving then-President Idriss Déby in 2021, his son Mahamat Déby served as transitional president until the 2024 election. Déby then won the vote handily, in results that have been heavily disputed and overshadowed by the killing of one of the candidates prior to the election.

Other: Lithuania, Dominican Republic, Madagascar, Vanuatu

June & July

India: Narendra Modi’s Hindu nationalist BJP unsurprisingly won the general election, albeit by much less than previously anticipated. So much so that this came as a shock, with expectations that the BJP would win 400 seats instead of the 240 that it managed to secure.

Mexico: Claudia Sheinbaum of the center-left Morena party, founded by outgoing President AMLO, is the first woman to be elected president in Mexico.

Venezuela: Incumbent President Nicolas Maduro was re-elected in an election whose results are heavily disputed.

Bulgaria: The center-right GERB party secured the most votes in this snap election, the country’s sixth in three years. But with only around a quarter of the seats, this result failed to end the country’s political instability, with parties failing to form a government, and leading to new parliamentary election in October 2024.

Mongolia: The incumbent social democratic MPP secured a reduced, narrow majority in parliament.

Other: Iceland, Serbia, Ireland, Belgium, Iraq, Mauritania, Rwanda

Looking Ahead

September: Sri Lanka, Algeria, Romania, Switzerland

October: Mozambique, Lithuania, Georgia, Uruguay, Chad

November: United States, Palau, Somaliland, Switzerland, Mauritius, Guinea-Bissau, Namibia, Romania

December: Ghana, Romania, Croatia, South Sudan