SANISHA PACKIRISAMY: 10 economic plot twists of 2024

As we draw the curtain on 2024, we are reminded of the unpredictability that has characterised this year’s economic and political landscape. The reverberations of unexpected events have been felt through financial markets and political institutions alike in an era defined by deepening inequality and escalating geopolitical strife.

Here are 10 of the most unexpected developments that shaped our world in 2024:

1. The fall of incumbents. In a global rejection of the political status quo, ruling parties faced unparalleled electoral defeats. Voters, burdened by inflation and inequality, turned their backs on centrism, embracing more radical alternatives. This marked the most significant shake-up in global politics in decades, leaving leaders to grapple with a profound shift in public expectations.

2. Trump’s political renaissance. Donald Trump’s return to the White House stunned the world, not only because of the barrage of legal battles he faced but also due to the contentious policies that defined his first term. With an adept campaign addressing economic discontent and job creation, Trump made inroads into unlikely bases of support. Worryingly, his second term could shape up to be even more volatile than his first as he solidifies his grip on power by installing loyalists in key cabinet roles and leveraging a Republican “red sweep” in Congress.

3. Trump victory resets rates outlook. Trump’s proposed economic policies have raised concerns over inflation and have led to expectations of higher terminal interest rates. Futures markets have shifted from expecting nine rate cuts in the US by late 2025 to just three. 

4. Japan finally tightens the screws. The Bank of Japan raised interest rates for the first time in 17 years in 2024, marking the end of an era of ultra-loose monetary policy in response to wage pressures hitting 33-year highs. This move, compounded by domestic political upheaval, reverberated through global markets, disrupting the popular carry trade that had seen investors borrow cheaply in yen to invest in higher-yielding assets.

5. China’s fight against weak demand. In stark contrast to the inflationary pressures experienced globally, China faced persistent deflationary challenges throughout 2024. While much of the world tightened monetary policies in response to rising prices, China deployed interest rate cuts and liquidity injections to stimulate demand. Despite these efforts, domestic consumption remained constrained, compounded by a struggling property market. However, China’s export sector demonstrated remarkable resilience, buoyed by sturdy global demand and competitive pricing strategies.

6. South Africa’s energy revival. After years of debilitating load-shedding, South Africa’s power sector turned a corner. The successful execution of the energy action plan revitalised Eskom’s ageing power stations, boosted private sector participation in generation capacity and restored energy reliability, offering a much-needed economic reprieve.

7. Voter discontent sparks political realignment in South Africa. In May, the ANC lost its majority for the first time since the end of apartheid, paving the way for a government of national unity. This dramatic shift in South Africa’s political landscape can be attributed to widespread discontent with the ANC’s governance, failures in service delivery, economic stagnation and the rapid rise of the MK Party, which capitalised on these sentiments. As a result of these changes, South Africa’s political environment has matured, advancing collaboration across ideological lines to address pressing national issues and reshape the future of governance in the country.

8. Inflation tamed to below 3% in South Africa. Declining food and energy prices contributed to cooling inflation, allowing the Reserve Bank to ease monetary policy. Nevertheless, apprehensions remain regarding stubborn inflation in certain categories, particularly medical costs§ averaging 9.2% since 2009, along with electricity prices at 11.9% and water at 7.9%.

9. A flurry of bills signed into South African law. The signing of critical bills in 2024, including the National Health Insurance Act and reforms to the energy and transport sectors, reflected a concerted effort to address the pressing socioeconomic challenges facing the country. But some legislative developments, such as the Pension Fund Amendment Bill and the Land Reform Bill, have been contentious.

10. A vote of confidence in South Africa’s reform efforts. S&P Global Ratings upgraded South Africa’s outlook to positive, driven by political reforms, improved energy availability and stronger growth prospects. This vote of confidence reflects the progress made under a unified government but also underscores the need for sustained reform momentum and fiscal discipline.

The outcomes of these 10 surprises are set to ripple through the coming year, influencing everything from economic outcomes to market returns. While some surprises may fade, others are likely to carry forward. The pressing question now is how leaders will address the forthcoming challenges and leverage the opportunities that lie ahead.

* Packirisamy is chief economist at Momentum Investments