This month’s coverage of the Americas features an update on Ecuador, where the leftist government of President Rafael Correa continues to struggle with the negative economic repercussions of sharply lower prices for oil, the country’s main exports and primary source of state income. Correa’s allies in the legislature recently approved a raft of changes to the constitution that among other things formalized the military’s role as a domestic police force and eliminated term restrictions on the presidency. As a package, the amendments point to a worrisome consolidation of power in the executive branch, but with the lifting of term limits only taking effect in 2021, Correa presumably will not be eligible to stand for re-election in 2017. The update will discuss the likelihood that the president will actually surrender control of his office (even if only for four years), and take a look at some of the figures most likely to succeed him if he does. Given the gloomy outlook for the economy, the recent slump in Correa’s approval rating, and the recent defeats of long-dominant leftist parties in Venezuela and Argentina, that group will include members of the opposition. As such, the analysis will include an examination of the policy changes that could be expected if opposition parties gain the upper hand, taking into consideration the political obstacles that a center-right administration would face as it attempts to implement a more market-based policy agenda.
In the Middle East and North Africa, the spotlight will be on Egypt, where the overwhelming victory of parties allied with the government of President Abdel Fattah El-Sisi at two-stage legislative elections held in late 2015 put the final nail in the coffin of the democratic revolution that toppled the autocratic regime of President Hosni Mubarak five years ago. The report will assess what the effective restoration of the old order portends for an economic reform program that had begun to gain some momentum prior to the Arab Spring uprising, but has been stalled in recent years by chronic episodes of political instability. The analysis will include an examination of the prospects for containing the security threat posed by a Sinai-based Islamist insurgency, the intensity of which can be expected to influence the government’s willingness to implement unpopular structural reforms that hold the potential to trigger more generalized unrest.
Our coverage of Asia features a new report on China that examines whether the stock market turmoil at the start of the year is a precursor of more volatility to come, and if so how it will affect domestic policy-making as the central bank balances its priorities for financial stability and managed currency depreciation. Our report looks at what China’s economy, the world’s growth engine, will deliver in 2016, assessing the impact on commodity markets and policy-making in Beijing as Communist Party leaders seek to bolster the country’s influence both regionally and on the global stage. In the latter regard, the report will discuss the implications of rising tensions over China’s territorial claims in the South China Sea, particularly as they affect relations with the US and the prospects for resolving the Korea problem. We will examine the outlook for investment-friendly reforms as China adapts to developments related to the launch of the Trans-Pacific Partnership, and how potential changes could impact on the nation’s macro-fiscal metrics and socio-political stability.
Turning to Western Europe, PRS will examine how Norway is adjusting to the economic fallout from the negative oil-price shock, which has prompted investment cuts by petroleum companies that are having a ripple effect along the supplier chain, contributing to a slump in house prices and rising unemployment rising. The report will assess what the economic headwinds mean for the stability of the minority government made up of the Conservative and Progress parties, which suffered a defeat at the hands of a resurgent Labor Party at recent local elections. The unity of the coalition is threatened by the divergent trends in support for the coalition parties, as the far-right Progress Party has made gains against the backdrop of the European refugee crisis. In terms of the economic outlook, the report will assess the implications of reduced oil income for fiscal and monetary policy, and what adjustments in those areas could mean for the stability of the currency and the risks related to household debt.
Our coverage of Eastern Europe includes an update on Romania, where Prime Minister Victor Ponta’s troubled tenure finally came to an end in November. Ponta’s removal strengthens the hand of the center-right president, Klaus Iohannis, but with the main governing PSD enjoying a rebound in popular support following the election of Dacian Ciolos as Ponta’s replacement, the main opposition PNL cannot assume that it will win a parliamentary election that falls due in November 2016. In the meantime, Ciolos has sent reassuring signals that his government of technocrats will maintain the orthodox policy course that has been rewarded by an upgrade in Romania’s credit rating and has positioned the economy to record one of the highest growth rates among EU members in 2016.