PRS’ coverage of the Americas is highlighted by a fully revised report on Brazil, where Dilma Rousseff faces a trial in the Senate in late August that will very likely bring an early end to her claim to the presidency. The Cabinet formed by Interim President Michel Temer has been attempting to right the crippled economy, and he has managed to score some legislative successes that probably could not have been achieved by the politically damaged Rousseff. However, assuming Rousseff’s ouster, Temer’s attention will be divided between trying to pull the economy out of its tailspin and working to firm his grip on power and broaden his base of support ahead of the 2018 presidential election. The report will assess the government’s prospects for successfully navigating the very rough economic seas—examining the steps that will be required to reverse the downturn and weighing the extent to which political factors might impede action—and analyzing what success or failure might mean for the investment climate and for the outcome of the next round of elections.
Our coverage of Western Europe leads with Italy, and will focus on the latest crisis to befall the coalition government led by Prime Minister Matteo Renzi, which must unravel the chaos caused by the huge unrestructured loan impairments that are weighing on the banking sector and that have been worsening since the global financial crash eight years ago. We look at the various options open to the government, and what is in store for an economy that is still struggling to make headway, and is now at risk from the after-effects of the UK’s decision to withdraw from the EU, which is threatening long-lasting effects for the political and economic scene on the continent. Our report includes forecasts of key fiscal-macro indicators, and looks at how these will affect political and social stability given that unemployment is rising, Renzi’s popularity is sliding, and a referendum on his landmark political reform bill is looming in October.
Spain also features in detail this month, as we ascertain what is next for the indebted sovereign borrower in the wake of the repeat general election held in late June, which produced no more conclusive a result than one held last December. Our report weighs up the likely options for interim Prime Minister Mariano Rajoy, who is charged with trying to cobble together a coalition against the growing threat of possibly having to stage a third election within a year, and what types of policies will be pursued when the administration is eventually formed. Our report analyzes the implications of the political gridlock for Spain’s fiscal stability program, as well as how it may impact on an economy that has been one of Europe’s success stories for broadly two years, aided in no small part by a booming tourism industry that has hitherto upheld investor sentiment.
Turning to South Asia, PRS will closely examine recent political developments in India, where Prime Minister Narendra Modi recently secured approval of a landmark tax reform measure in the opposition-controlled upper house of Parliament. The achievement will no doubt cheer investors who expected an aggressive reform push after Modi’s NDA coalition won a landslide victory in 2014, and have been disappointed by the lack of results thus far, which is almost wholly attributable to obstruction by members of the upper legislative chamber. PRS will assess what the victory means for the remainder of the government’s ambitious and politically controversial reform agenda, which has significant implications for the climate for foreign investment and trade, and how key state elections falling due over the next 18 months might affect Modi’s ability to ensure that his reforms produce a broad improvement in living standards, which will ultimately determine whether the NDA is granted a fresh mandate to continue pursuing its reform agenda in 2018.
Our extensive coverage of sub-Saharan Africa this month casts a critical eye on Ghana, which is still struggling to uphold investor confidence in the wake of the commodity price crash, forcing the government to pull the plug on a $500 million Eurobond issue following a spike in borrowing costs that is now raising difficult questions concerning state financing. Our report sets out an assessment of medium-term fiscal sustainability, and how relations with the IMF are likely to pan out in view of recent central bank reforms that contravene the Fund’s directives. We look at what the economic downturn and rampant inflation portend for social stability and for the commercial sector in advance of a general election that will take place on December 7, including the risk of election-related unrest and the uncertainty stemming from the possibility of the government changing hands.