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Coming Soon for April 2023

geopolitical risk ratings firm

PRS’ coverage of the Americas this month includes reports on Panama and Jamaica, where support for Prime Minister Andrew Holness’ JLP government is eroding amid a steep rise in living costs. With no election required until 2025, Holness has plenty of time to repair the damage, but the fiscal room to address the sources of discontent will be limited in the near term by pressure to maintain fiscal discipline, as any significant slippage would carry a risk of triggering market volatility that undermine efforts to dampen inflation. In addition to assessing the government’s prospects for striking a balance between those competing pressures, the report will discuss the outlook for improvements related to crime and other factors that contribute to elevated risk.

Coverage of Western Europe features reports on Germany and France, where a strong backlash against pension reforms enacted by President Emmanuel Macron without a vote in the Parliament has raised the specter of a protracted bout of domestic upheaval and cast doubt on the viability of Prime Minister Elisabeth Borne’s center-right government, which survived a confidence vote last month by an uncomfortably narrow margin. With polling data indicating that a snap election would likely result in significant gains for populist parties of the right and the left, Macron has directed Borne to do what is necessary to ensure the backing of the center-right Republicans, on which the government depends for its majority.

Our analysis will discuss how the brewing political crisis could play out, and what the alternative scenarios would mean both for government stability over the more than four years remaining in Macron’s term and the fate of president’s broader reform agenda. The risk analysis will also discuss the impact of heightened domestic political tensions on the near-term performance of an economy that was already facing challenges related to a global effort to rein in decades-high inflation.

In Eastern Europe, the spotlight is on Poland, where the populist conservative PiS could face a strong challenge to its hold on power at this year’s elections if it fails to meet rule-of-law standards required to access billions of dollars in EU financial support. The government has taken steps to appease its critics in Brussels, but the timeline for implementing changes to controversial judicial reforms has become unclear after President Andrzej Duda submitted the legislation for review by the Constitutional Tribunal.

A power struggle within the judicial body between allies of Prime Minister Mateusz Morawiecki and Justice Minister Zbigniew Ziobro, who are rivals to succeed PiS leader Jaroslaw Kaczynski as the leader of the country’s conservative movement, could create an obstacle to the timely delivery of a ruling, and there are no guarantees of a favorable decision. The risk analysis will include an examination of what a delay in the release of the EU development funds would mean for economic performance in the near term and, by extension, the PiS’ chances of winning re-election, as well as a discussion of the policy implications of the replacement of the populist incumbent by a more centrist government.

We also include two short updates this month for the region. One is on Latvia in the wake of last year’s elections, which is one of the smaller NATO members feeling vulnerable to Russia’s invasion of Ukraine. The other is dedicated to European Union (EU) hopeful Albania, as we look at the current political temperature ahead of local elections scheduled for May, in a country that is long used to public protests and tensions over corruption, its structural problems, and administrative mismanagement. As well as analyzing the stability of the government and its factional opposition, as accusations fly over Prime Minister Edi Rama’s alleged involvement in suspicious dealings, we also investigate the latest report from the European Parliament on Albania’s reforms, indicating how far the country must go to gain EU membership. We also investigate how the country’s economy is faring in 2023 considering the global inflation problem, tightening financial conditions, and uncertain prospects among key trading partners, ahead of the summer tourism season that is becoming an increasingly important, incipient source of economic growth and fiscal revenue.

Turning to the Middle East and North Africa, PRS will report on Iran and Israel, where Benjamin Netanyahu’s right-wing government is grappling with protests triggered by proposed judicial reforms demanded by the far-right Religious Zionist Party, whose support is essential to the government’s claim to a parliamentary majority. Widespread criticism at home and abroad has focused on the negative implications of the reforms for the independence of the judiciary and the ability of the courts to act as a check on actions by the executive and the Parliament, both of which are seen as essential to ensuring adherence to the rule of law.

The report will assess whether there is room for compromise without jeopardizing the government’s claim to a majority and how possible changes might affect the political risks related to the controversy. PRS will also examine how domestic political tensions might influence the government’s approach to managing the security threats stemming from conflict with Palestinians in the West Bank and the nuclear ambitions of Iran, which will continue to cast a shadow over an otherwise favorable investment climate, regardless of developments related to the judicial reforms.

Yemen is featured in our coverage of the region, as we assess the recent Chinese-brokered agreement signed between Iran and Saudi Arabia which aims to restore diplomatic relations between the two adversaries, and how this will affect the frozen proxy war in Yemen that has pitted the Iranian-backed Houthi rebels in charge of the capital city Sana’a against the Saudi-led coalition supporting the internationally recognized government based in Aden. We analyze recent developments in the conflict, both politically and economically, and we assess whether the fragile peace that can materially affect trade and investment will endure in a country that has been wracked by internecine civil conflict since 2014, causing mass fatalities, an enormous humanitarian crisis, and damaged infrastructure. Our report goes on to look at how the country’s economic prospects are likely to pan-out in light of a recent large central bank capitalization courtesy of Saudi Arabian philanthropy, and the authorities’ plans for development and reconstruction.

Coverage of Asia this month features reports on Philippines and India, where the political dominance of Prime Minister Narendra Modi’s BJP has been bolstered by the expulsion of Rahul Gandhi, the leader of the main opposition INC, from the Parliament following his conviction on defamation charges. The BJP is looking to build momentum ahead of the 2024 parliamentary elections by piling up victories at the six (and possibly seven) state elections still to be held this year and has a chance to deliver a knockout blow to the opposition if it can unseat the INC in Rajasthan and Chhattisgarh, two of the three states in which Gandhi’s party heads the government.

Modi will continue to lean heavily on a populist strategy that combines generous welfare spending and appeals to Hindu nationalist sentiment to provide him with the political capital required to implement the structural reforms that are key to unleashing India’s massive economic potential. Our analysis will focus on the implications of that strategy for both fiscal and domestic political stability, as well as the risks arising from India’s increasingly intense rivalry with China, and how those factors will impact the risk for investors over the next five years.

Finally, in our coverage of sub-Saharan Africa this month we include a report on Burkina Faso, where the relatively inexperienced mid-30s military captain, Ibrahim Traoré, is now leading the junta after ousting Lieutenant-Colonel Paul-Henri Sandaogo Damiba in a second coup last year. The country remains beholden to a deadly and pervasive Islamist insurgency that Traoré has vowed to address more effectively than Damiba and the deposed civilian president, Roch Marc Christian Kaboré. In so doing, however, the country has become distanced from France, historically a key partner, with Russia gaining a foothold in the wake of President Emmanuel Macron pulling French forces from the region, which may have implications for business and investment. As well as also looking at the prospects of Burkina Faso returning to democracy, as intended, by July 2024, our report goes on to assess the macro-fiscal situation in a country with a paucity of tax revenue, a great deal of impoverishment and insecurity, and facing the twin perils of high prices, of food and fertilizers especially, and slowing global economic growth.


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