Coming Soon in Our June 2020 Political Risk Reports

In addition to updates on Dominican Republic, Ecuador, Panama, and Uruguay, PRS’ coverage of the Americas this month includes a fully revised report on the United States, where political tensions are running higher than usual ahead of a high-stakes general election due to take place in early November.  Partisan polarization has been exacerbated by disagreement over how to deal with the COVID-19 pandemic and the related economic crisis, which has contributed to mass unemployment and a ballooning budget deficit, and widespread episodes of destructive social unrest rooted in racial inequality have added fuel to an already incendiary mix.

In most cases, such circumstances would likely spell disaster for an incumbent administration.  However, the structural peculiarities of the US electoral system and the rigidity of partisan loyalties create a not insignificant probability that President Donald Trump could still secure re-election and the ability of the incumbent Republicans to retain their majority in the Senate is likewise uncertain.  The report will assess the likelihood of various electoral outcomes and discuss the policy implications of each, with particular emphasis on how the business climate might be affected as the next administration grapples with the challenges of putting jobless Americans back to work and shrinking a bloated budget deficit.

Our coverage of Western Europe this month includes a report on Belgium, alongside another on the Netherlands where we look into how Prime Minister Mark Rutte’s four-party coalition government is holding up as the country addresses the challenge of the COVID-19 pandemic weakening the economy and draining public resources. We look into government stability given the coalition’s weakened parliamentary position, and identify how the recent refusal of the Dutch parliament to ratify the EU’s proposed free trade agreement with the Mercosur group of Latin American countries – together with Rutte’s refusal to accept orphans from a Greek refugee center and his opposition to the EU’s COVID-19 aid plan – will impact European relations and voter preferences. Our report goes on to evaluate how the pandemic emergency has altered the country’s macro-fiscal metrics, and to what extent it will undermine the Dutch asset class, bearing in the mind the possibility of a no-deal Brexit now that Brussels and London are at loggerheads in a dispute over fishing rights causing delays among other bones of contention.

Coverage of Eastern Europe will include an update on Russia, where President Vladimir Putin faces the challenge of managing the economic fallout from a steep fall in global oil prices and a significant weakening of domestic demand resulting from restrictions imposed to contain the spread of COVID-19.  The economic difficulties will not be so severe as to threaten the stability of the incumbent regime, but the government will likely be forced to make some unpopular policy decisions that could trigger unrest, and political considerations will probably rule out any chance of overtures from Moscow to improve relations with the EU.  The update will discuss what steps the administration is likely to take to facilitate a post-pandemic economic revival and how those might affect the business climate.  An assessment of the near-term economic outlook will include a discussion of the government’s plan for easing health-related restrictions, which was initiated even as the number of cases continued to increase, suggesting that the government is prioritizing the revival of the economy over containing the spread of the virus.

Turning to the Middle East and North Africa, the roster for June includes new reports on Tunisia and Iraq, where a new government was finally confirmed in early May, more than five months after violent protests forced Prime Minister Adil Abdul Mahdi to tender his resignation.  The new leader, Mustafa al-Kadhimi, is a former journalist who has been serving as head of national intelligence. It remains to be seen whether he is up to the task of uniting Iraq’s fragmented and frequently antagonistic political factions, a  challenge made all the more daunting by the damaging economic fallout from a steep decline in global oil prices against the backdrop of the COVID-19 pandemic.

The report will discuss the policy implications of the various deals Kadhimi will need to strike in order to claim a legislative majority, and what that portends for progress on long-delayed reforms, including the approval of a national oil law that is crucial to fully exploiting the potential of Iraq’s oil wealth.  The analysis will also include an examination of the political and economic risks arising from Kurdish nationalism, and assessment of the Kadhimi’s prospects for successfully balancing the competing pressure applied by the US, Iran, and Saudi Arabia.

Our coverage of sub-Saharan Africa looks at how the global crisis is affecting investor risk in Kenya, where political divisions had seemingly become less pronounced as President Kenyatta coordinated an emergency plan to protect lives and sustain the economy. Recently the risks have re-emerged in the form of public discontent over alleged police brutality during the lockdown, and some disquiet over the extension of the national curfew through to early July, amid growing concerns for the consolidation of presidential powers and what that entails for the 2022 succession plan. Our report assesses the cabinet reshuffle that preceded the crisis, rebellions within the ruling party, and how Kenyan interference in Somalian politics is evolving, all of which are contributing to Kenya’s risk profile. We also look at how COVID-19 is affecting the population at large, and the economic and fiscal outlook by identifying the most exposed sectors, the impact it is having on policy-making, and on key risk indicators signaling whether the country is in danger of major debt distress disrupting payments.

In our extensive coverage of Asian markets this month, which includes detailed reports on Indonesia and Thailand, we look at how South Korea is shaping up after the elections delivered a three-fifths super-majority of seats in the national legislature to the liberal bloc led by the Democratic Party supporting President Moon Jae-In. As well as looking at tensions in the legislature and Moon’s agenda for the second half of his single-term through to the elections in 2022 we assess the government’s COVID-19 response, the fiscal and monetary measures it has demanded, and ultimately whether the recent rally in the won and South Korean assets is justified, or whether it will prove short-lived. With that in mind, we look in detail at the foreign policy risks stemming from rising tensions with Japan over colonial era and wartime reparations, the perennial North Korea question, and the trade and diplomatic logjam pitting China against the US that is impinging on South Korea’s investor appeal. Our report rounds out, as usual, with a look into the latest economic indicators and forecasts to analyze the downturn and subsequent recovery stages of the pandemic.

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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