Coming Soon in Our December 2019 Political Risk Reports

PRS’ coverage of the Americas this month includes fully revised reports on Dominican Republic, Ecuador, Nicaragua, and Uruguay, where Luis Lacalle Pou, the candidate of the center-right National (Blancos) Party, narrowly defeated the candidate of the incumbent Broad Front in a run-off presidential election held in late November. Although the center-left Broad Front has lost control of the executive for the first time in 15 years, it remains the single largest party, and Lacalle Pou’s ability to command a majority in either legislative chamber hinges on the support of both the centrist Colorado Party and the far-right populist Open Cabildo, which finished fourth, slightly behind the Colorados, in its maiden election.

The report will assess the feasibility of a legislative strategy that depends on the cooperation of three ideologically diverse parties—a comparison of the campaign slogans of the Blancos (“What Unites Us”) and Open Cabildo (“Zero Tolerance”) highlights the potential for challenges in that regard—and what can be expected in terms of policy changes, depending on whether the arrangement proves to be viable or not. PRS will discuss the implications for the climate for investment and trade, as well as the probable impact on economic performance under the alternative scenarios.

Our coverage of Western Europe this month includes a short update on the fast-evolving situation in Malta, where a political storm is erupting as more details emerge concerning the assassination of investigative journalist Daphne Caruana Galizia two years ago. Following an initial lack of progress finding who was responsible, or putting an end to the corruption and culture of impunity blighting the country’s risk rating, recent public protests have prompted several government officials to resign, and Prime Minister Joseph Muscat to announce his departure for January. Our report looks into what’s next for the tiny EU state as it attempts to recover its damaged reputation, amid uncertainty over Brexit and Europe’s economic outlook. In particular we note who is likely to take over, whether there are likely to be early elections, and what changes may ensue to address the problems.

We also include a more detailed report on Belgium to assess how the negotiations are faring to form a federal government following the elections held in May (along with European and sub-national voting), which once again led to a broad split in party political representation along geographical and linguistic lines, creating obstacles to the formation of a new multi-party coalition, as is par for the course in Belgium’s complicated polity. Our report looks into the latest attempt to strike a six-party agreement between francophone and Flemish socialists, liberals, and greens, and what this might deliver—should it go ahead—for the various policies affecting business, and fiscal sustainability. On that, our report goes on to assess the European Commission’s latest forecasts for Belgium’s federal deficit and debt burden, and we also look at other key economic variables, including growth, inflation, and unemployment, affecting investment decision-making in 2020.

Looking at Eastern Europe, PRS will publish an update on Ukraine, where President Volodymyr Zelensky’s gamble on a snap parliamentary election paid off handsomely, with the July vote delivering a comfortable majority for his party, Servant of the People. However, with his administration focusing on bringing an end to the ongoing armed conflict with Russian-backed separatists in the eastern Donbass region, he has failed to formulate a policy agenda for his allies to enact. Moreover, his ties to a scandal-tainted oligarch have contributed to reluctance on the part of the IMF to extend billions in badly needed loans to the government in Kiev, and could potentially tarnish his image as a crusader against corruption.

With the stability of the government bolstered in the near term by the results of the July election, the focus of analysis in the near term will be the prospects for progress in ending the Donbass conflict—including the potential for Ukraine’s central role in the scandal engulfing US President Donald Trump to influence the strategy of the participants in negotiations—and the steps Zelensky will need to take to win the confidence of the IMF. The broader analysis will assess the medium-term potential for the incumbent administration to establish a firmer foundation for macroeconomic stability and a more hospitable climate for investment and trade.

Coverage of the Middle East and North Africa includes an update on the deteriorating situation in Iraq, and a fully revised report on Tunisia, where a recently completed election cycle has produced another fragmented parliament dominated by the moderate Islamist Ennahda, whose participation will likely be essential to the viability of any governing coalition. That is unlikely to be an issue for President-elect Kais Saied, a political independent and social conservative, but could pose an obstacle to building a broader alliance. In addition to assessing the prospects for establishing a stable, functioning government, the report will discuss whether and how a coalition formed over the coming weeks might overcome the obstacles to implementing a reform agenda that stymied the efforts of previous administrations, and how success or failure on that score will affect the risks stemming from turmoil and macroeconomic instability, as well as the more general climate for business.

This month our extensive coverage of sub-Saharan Africa includes reports on the political and economic risks in Botswana, Cameroon, Ethiopia, Nigeria, and Zimbabwe, and their effects on the security of assets and local currency volatility. In Cameroon, for example, tensions are presently heightened ahead of the legislative and local council elections scheduled for February that the main opposition forces are planning to boycott given the backdrop of restiveness among the minority Anglophone community eyeing Francophone hegemony with alarm. PRS has been consistently warning of the dangers of a secessionist push potentially spiraling into a more serious conflict in the country, and affecting bordering nations. This is further underlined by separatist rebels recently firing on a passenger jet belonging to the national carrier Cameroon Airlines on its approach into Bamenda airport in the Anglophone-majority North-West Region. In each of the reports, we look at how institutional and policy-making risks are likely to develop in the coming year, and how this will affect major resources and other investors by looking at debt sustainability and key measures such as reserves coverage for prospective payments trends.

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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