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Coming Soon in Our December 2018 Political Risk Reports

The PRS Group’s coverage of the Americas this month includes an update on Ecuador, where President Lenin Moreno has continued to implement an orthodox economic policy program, a strategy that has already cost him the support of his one-time leftist allies in the legislature, leaving the government dependent on the backing of centrist and center-right opposition parties for a majority.  Approval of a fiscal consolidation plan in August has cleared the way for Ecuador to achieve a lending agreement with the IMF, which will be crucial to diminishing debt-related risks.  However, difficult fiscal decisions await, and there are no guarantees that even pro-business elements among the opposition will risk incurring public wrath by backing painful austerity measures.

Likewise, the government’s plans to attract some $4.6 billion of new investment in the mining sector by the end of the current term are meeting resistance from indigenous groups, creating a risk of domestic unrest that could undermine Ecuador’s attractiveness to foreign investors.  PRS will assess the government’s prospects for implementing its economic development strategy, and discuss the implications of success or failure for both political and economic stability going forward.

Turning to Western Europe, our coverage this month includes an update on Belgium, and features a fully revised report on Portugal, where the minority PS government headed by Prime Minister António Costa is now in the final year of a four-year term.  The analysis will include an assessment of the likely outcome of a general election that falls due in October 2019, but could be held concurrently with elections for seats in the European Parliament that are scheduled to take place in May.

Key risk factors to be examined include the potential for increased union militancy, and questions about whether the PS will be able to rely on the continued support of its current left-leaning allies as pressure increases to push forward with structural reforms required to ensure the long-term stability of public finances, which is at present underpinned by a wave of cyclical economic improvement.  In that light we enquire whether the credit rating agencies’ faith in Portugal’s sovereign borrower ratings is entirely justified, as we trace out likely scenarios for key macro-fiscal variables in 2019, focusing on longer-term debt sustainability and bank stability risks lurking in the shadows.

Our coverage of Eastern Europe includes an update on Bulgaria, where the governing alliance of Prime Minister Boyko Borissov’s center-right GERB and the far-right UP bloc is holding together, despite the best efforts of the main opposition BSP, which failed yet again to topple the government by means of a confidence vote in October.  The BSP has narrowed GERB’s lead in polls of voter preferences, but its inability to convince other parties to help it bring down Borissov’s administration highlights the Socialists’ limited potential to forge a majority coalition even if it managed to win an early election.

The update will focus on the potential obstacles to policy implementation, including the veto power of President Rumen Radev, and their implications for the prospects for an improvement in the business climate over the next 12–18 months.  Our analysis will also include forecasts of key macroeconomic variables in 2019.

Turning to the Middle East and North Africa, PRS will issue an update this month on Tunisia, where Prime Minister Youssef Chahed has managed to stay in office despite losing the support of his own Nidaa Tounes.  Chahed retains the backing of Ennahda and a bloc of former Nidaa Tounes lawmakers who bolted the party in early 2016, but it is an open question whether the government’s weakened majority can be sustained in the face of a backlash that is certain to greet fresh austerity measures or a strong push to invigorate a stalled privatization program.

The government’s effectiveness will be influenced by the electoral calculations of the various parties as they gear up for presidential and parliamentary elections in October and December 2019, respectively.  In addition to assessing the near-term outlook for political stability, the update will examine the potential for elections to impact business risk by affecting the outlook for the implementation of structural reforms and to produce a rise or fall in security-related threats.

Reporting on sub-Saharan Africa this month includes an update on Guinea-Bissau and a post-election assessment of risk in Madagascar, and features an extensive analysis of political risk in Zimbabwe, five months on from the first election of the post-Mugabe era.  The report examines President Emmerson Mnangagwa’s Cabinet choices for evidence of a commitment to promoting national unity and rectifying the economic damage wrought by the ill-conceived policies of his predecessor, and assesses the implications of ongoing challenges to the legitimacy of the July elections by Mnangagwa’s defeated challenger, Nelson Chamisa, for the government’s chances of securing multilateral aid and attracting higher levels of foreign investment.

In that light, PRS will look at the immediate challenges facing Finance Minister Mthuli Ncube, whose main tasks are devising a credible strategy for clearing multilateral debt arrears and reviving an economy hobbled by a crippling fuel crisis, rural food shortages, and soaring inflation that is pushing the country to the brink of another economic collapse.

In Asia we will publish reports on the Philippines and South Korea this month, as well as an update on Indonesia, which will hold its first-ever concurrent presidential and legislative elections in April 2019.  With the campaign now well under way, Prabowo Subianto, a former army general and chair of Gerindra, is attempting to unseat President Joko Widodo, who is once again standing as the candidate of the PDI-P, in a rematch of the 2014 contest.  In assessing the likely outcome of the elections, PRS will look at how the recurring issues of national and religious identity could affect voting patterns, as well as the implications of those same phenomena for post-election social stability and policy decisions related to economic development, such as dependency on foreign borrowing, notably from China.

Our report examines the fiscal implications of a pre-election rise in public spending on local projects for the government’s ability to hit its fiscal targets, a source of concern in light of the near doubling of the public debt-to-GDP ratio since Jokowi came to power in 2014.  PRS will also assess the macro-risks stemming from the US-China trade war, and the prospects for the rupiah in a global climate marked by heightened sensitivity to emerging-market risks.

Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. This commentary represents a sneak peek from our upcoming political risk reports. For more information please contact us at (315) 431-0511 and sales@prsgroup.com, or explore a subscription to PRS Online and/or ICRG Online today to receive political risk updates.

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