Coming Soon in Our January 2022 Political Risk Reports

PRS’ coverage of the Americas this month includes fully revised reports on Brazil, Mexico, Venezuela, and Chile, where the administration set to take office in March had pledged to abandon the liberal economic model that has prevailed since the restoration of democratic governance more than three decades ago in favor of a leftist development strategy. President-elect Gabriel Boric has pledged to replace the private pension system with one controlled by the government and increase the tax burden of corporations and the wealthiest Chileans, and he also advocates green development as an alternative to environmentally damaging resource extraction.

The report will assess the likelihood that Boric will be able to secure passage of his most controversial proposals in the Congress, where his AD coalition failed to come close to winning a majority in either chamber. In that vein, the analysis will examine to what degree Boric and the AD might achieve their policy aims via the process of constitutional reform that is taking place under the direction of a body dominated by left-leaning political forces. The risk analysis will include a discussion of the economic implications of the new government’s policy plans and how key constitutional reforms can be expected to affect the climate for investment, including the risk of a repeat of the destabilizing unrest that rocked the country in late 2019.

Our extensive coverage of the Asia Pacific region this month includes reports on Australia, the Philippines, and also Hong Kong where we assess how China’s throttling of democracy is having an impact on the business reputation of its special administrative region. Our report looks in detail at the legislative elections that were held in December, and how the results will impact the local political scene, policymaking and social stability, bearing in mind the political chicanery used to neuter the pro-democracy opposition under the convenience of the national security law. Our report looks into the clampdown on press freedom and the growing number of judicial cases against democratic campaigners as well as various other aspects of the operating environment influencing assets. They include Beijing’s no-tolerance policy towards COVID-19 cases, which may complicate plans to fully reopen the Hong Kong border, and poses an ongoing risk to tourism and trade more widely, plus the vulnerabilities in China’s financial and real estate sectors highlighted by the record high value for Chinese offshore corporate defaults in December, given Hong Kong’s increasing focus on Chinese listings. Our report also looks into relevant aspects of foreign policy and it rounds out with up-to-date forecasts for GDP growth and other relevant economic variables including an assessment of how Hong Kong will be affected by the global inflation problem.

Turning to the Middle East and North Africa, the roster for January includes updates on Syria and Egypt, which has weathered the health and economic crises generated by the COVID-19 pandemic much better than most other countries. President Abdel Fattah al-Sisi’s unexpected decision to forego another extension of the state of emergency that has been in place nearly continuously since the early 1980s, while largely a symbolic gesture, is nevertheless indicative of the autocratic leader’s confidence that domestic political risks are under control.

Along with a fully updated report on Switzerland this month, our coverage of Western Europe delves into the latest political developments in the United Kingdom in the wake of a series of well-publicized scandals, Covid-related mishaps and voting rebellions giving the formerly popular Prime Minister Boris Johnson more than the mid-term blues. We assess the investor risk implications of the government’s waning popularity, with the main opposition Labor Party and its leader Keir Starmer taking decisive leads in the opinion polls and plotting a comeback at the earliest opportunity. Although it is not likely the Conservative administration will be forced from office just yet, with a general election not due until 2024, and the party holding a significant majority in the House of Commons, we look into whether Johnson’s leadership is over and who would be most likely to replace him if it comes to the crunch. Our report moreover looks into the impact on the government’s wavering leveling-up agenda, bearing in mind the lasting impact of the pandemic, including a worsened deficit and debt burden, the ongoing effects of Brexit on trade and the ability to source European labor, plus the concerns expressed over soaring inflation, tightening borrowing terms and tax rises. With all that in mind we present fully refreshed forecasts of major macroeconomic and fiscal variables including the likely trends for pound-sterling and asset prices in the coming year.

Coverage of Eastern Europe will include an update on Azerbaijan and a fully revised report on Slovakia, where the greater political stability evident in the past few months mostly reflects the shared aversion of the governing parties to chancing an early election that could cost them parliamentary seats and a share of power. Elections are not required for more than two years, and the availability of loans and grants from the EU’s recovery fund will provide the incumbents with an opportunity to boost their standing by engineering a strong and sustained economic rebound.

The report will assess the prospects for success on that front, which implies the implementation of reforms designed to improve the climate for investment and an aggressive push to reduce corruption. The analysis will also examine the implications of the stalling of the national vaccination program with close to 50% of the population yet to receive even a first jab, and the danger of setbacks in the battle against COVID-19 might once again produce destabilizing tensions within the coalition.

Over in sub-Saharan Africa we take the current political temperature in Kenya in what will be an important year ahead, with a general election scheduled for August 9 that will see the de facto opposition leader and former prime minister, Raila Odinga, make a fifth bid for the presidency, this time with the backing of the incumbent Uhuru Kenyatta, who is likely to face a stiff challenge from the deputy president, William Ruto. In the wake of the collapse of the Building Bridges Initiative containing institutional reforms that were rejected as unconstitutional by the High Court, our report looks into how the elections are likely to proceed and whether investors should be prepared for the possibility of a disputed outcome, and violence, bearing in mind the country’s history in that regard and what would appear to be a rise in voter apathy. Our report goes on to look at other aspects of Kenya’s country risk profile, including the impact of a new chief justice, mining policy, border problems with Tanzania and Somalia, and how the pandemic is affecting key variables such as the labor force, tourism and trade. Our report rounds out by assessing prospects for major macroeconomic and fiscal policy variables, including GDP growth, inflation, the balance of payments, and the deficit and debt situation all affecting creditworthiness and the Kenyan shilling.

The update will assess the potential for continued calm conditions, focusing on the near-term economic outlook and the government’s strategy for sustaining robust growth over the medium term. The analysis will include an examination of external risks, the most immediate of which remains the potential for conflict with Ethiopia over a dam project that could adversely affect Egypt’s water supply.

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 ICRG Online and/or World Service Online today to receive political risk updates.

 

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