Coming Soon in Our January 2019 Political Risk Reports

PRS’ coverage of the Americas this month includes a fully revised report on Brazil, where a new president, Jair Bolsonaro, took office on January 1 with a clear mandate to wage a battle against official corruption and violent crime. The right-wing former army officer has signaled that he does not intend to let constitutional constraints limit his freedom to achieve those objectives, an approach that may be tolerated by the general population, but is a recipe for destabilizing turf wars within the governing structure, and will face strong resistance from left-leaning parties and other groups targeted by Bolsonaro’s promised war against the “ideology of submission.”

How well Brazil weathers the wrenching changes portended by the dramatic shift in the political orientation of the government will depend to a great degree on whether Bolsonaro’s pursuit of his social agenda becomes a distraction from (or even an obstacle to) implementing the reforms that will be required to create a foundation for long-term fiscal stability, an issue of great concern for investors that seems to be less of a priority for Bolsonaro. The report will take a close look at the new administration’s legislative agenda, assess the prospects for implementation, and discuss the likely impact of success or failure on both political and economic stability in the near-to-medium term.

In addition to an update on Switzerland, our coverage of Western Europe this month includes an update on Denmark, where the minority “blue bloc” coalition led by Prime Minister Lars Lokke Rasmussen’s Liberal Party is on course to be defeated by the main opposition Social Democrats in a closely fought general election due to take place in June. Our report assesses the relative chances of the election producing a “red bloc” coalition or minority SD government that relies on the support of the populist-nationalist DF on confidence and supply votes. With the economy performing as well as can be expected, the election debate will be dominated by the issue of asylum and immigration policy, which no party can afford to ignore, but which, in general, will work to the advantage of the DF. The update will examine how policy direction and priorities might be affected by the configuration of the next government, and what the economic outlook implies for fiscal trends.

Turning to Eastern Europe, this month’s publications include an update on Slovakia and a new report on Hungary, where the Prime Minister Viktor Orbán’s right-leaning Fidesz-led government has encountered unexpected political headwinds less than a year after winning re-election to a third consecutive term by a commanding majority in April 2018. PRS’ analysis will include an assessment of what the renewed signs of vigor on the part of the opposition could mean for Orbán’s freedom to implement his agenda going forward, and the manner in which any tactical shifts might be expected to affect the domestic business climate. The report will also examine the implications of the government’s latest attack on the independence of the judiciary for relations with the EU, and the potential for Hungary to incur financial penalties as a result of its failure to adhere to EU norms will factor into our five-year macroeconomic forecasts.

Our coverage of the Middle East and North Africa will feature updates on Israel and the United Arab Emirates, and will also include a fully revised report on Egypt, where President Abdel Fattah el-Sisi has been consolidating power since winning election to a second term in March 2018.  Although the report will discuss the lingering threats to political stability, the analysis will focus on an assessment of the obstacles the government must overcome in order to achieve its ambitious development goals, and its chances of doing so. The report will also analyze the government’s priorities with regard to attracting investment, which will illuminate which sectors hold the greatest promise for expanded opportunities.

Taking a look at sub-Saharan Africa, PRS will examine the latest political and economic developments in Ghana and Malawi, and will issue a detailed report on Côte d’Ivoire that analyzes the risk implications of the collapse of the Houphouëtist coalition that has formed the government since the restoration of democratic rule in 2010, which has forced President Alassane Ouattara to scrap his plans to seek a third term in 2020. The report will assess the dangers associated with the political divorce of the RDR and the PDCI in the light of the lingering ethnic, sectarian, and regional rivalries that persist in the post-civil war period and played a role in army mutinies that erupted in 2017-2018. Our report rounds out by analyzing how the heightened risk of political instability might impact the country’s strong macroeconomic position and improving fiscal metrics, which are underpinned by expansive natural resource exploitation.

In Asia, along with reports on Hong Kong, Mongolia, and New Zealand, our principal focus this month concerns the difficulties faced by the ruling Liberal-National coalition in Australia, which lost its claim to a majority in the lower house of Parliament after the LP failed to hold the seat vacated by former Prime Minister Malcolm Turnbull, who was ousted in a party coup in September. An election to renew the lower house is required by November, but may be held concurrently with a scheduled vote in May to fill one-half of the seats in the Senate. Our report will focus on the policy programs being announced by the LP-NP alliance and the main opposition ALP, which is favored to come out on top, regardless of when the voting takes place. The analysis includes an examination of recent economic trends and how they may be affected by a leftward shift in key policy areas, as well as external developments affecting exports, investment, and other variables, including fiscal trends guiding short- and longer-term movements in Australian currency and assets.

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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