Some unlikely economies are poised to do well
Posted by hkarner - 12. November 2016
Source: The Economist
Subject: The world economy: Coming up Trumps
THOUGH many outside America are dismayed at the prospect of Donald Trump as president, not everyone is despondent. When the news of Mr Trump’s victory reached the floor of the Duma, Russia’s lower house of parliament, the assembled politicians burst into applause. Such enthusiasm in Russia is in part a reflection of the bromance between Mr Trump and Vladimir Putin, Russia’s president. But it is also because Russia may be one of the few economies that might benefit from—or at least, be indifferent to—a Trump presidency.
It helps that Russia’s economy has endured a rough time recently and that some kind of rebound is probably due. Its GDP fell by 3.7% last year and will shrink again this year, according to the IMF. Russia has one of the cheapest currencies in The Economist’s Big Mac Index, which compares the relative cost of burgers across the globe. By this measure, the rouble is around 60% undervalued against the dollar. Inflation, which rose to over 16% in early 2015 after a big fall in the rouble, has fallen to around 6%. That has allowed Russia’s central bank gradually to reduce interest rates from a peak of 17% to 10%. Mr Trump’s victory raises the chances that economic sanctions imposed by the West, following Russian interference in Ukraine, will be lifted. That will give the economy an extra fillip.Tellingly, other candidates for betterment in the early part of Mr Trump’s presidency are also beaten-down economies with the potential to rebound. Egypt has many problems but now it at least has one of the world’s cheapest currencies (by the Big Mac gauge), following its recent decision to let the pound float. Devaluation will further push up inflation but should in time relieve the shortage of foreign currency that has hampered Egyptian business. Argentina’s economy has gone through some of the pain that lies ahead for Egypt. If global markets do not go into a tailspin, it could bounce back in 2017, even if hopes of a trade deal with America now look forlorn. Pakistan’s economy has been quietly improving in recent years, helped by a lower price of oil, on which it is heavily reliant. It is perhaps too peripheral to America’s economy to be knocked off its present course.
If pushed, a hopeless optimist might make a medium-term case for China, if it can avoid an all-out trade war with America in the meantime. It is unlikely to mourn the likely death of the Trans-Pacific Partnership, or TPP, a trade deal negotiated by Barack Obama but slammed by Mr Trump on the campaign trail. China was not a party to it and it posed a minor threat to its production networks in Asia. And if the wave of populism that spawned Brexit and now elected Mr Trump engulfs the euro area, China might even begin to look like a refuge for rich-world investors.