Coming Soon in Our June 2021 Political Risk Reports

PRS’ coverage of the Americas this month includes updates on Nicaragua and Panama, as well as fully revised reports on Guatemala, Jamaica, and Ecuador, where an ideologically diverse and fragile coalition government that took office in late May has inherited the task of reviving an already weak economy that was hobbled by a prolonged bout of political dysfunction and the damage caused by the COVID-19 pandemic. President Guillermo Lasso’s center-right CREO won just 12 seats in the 137-member National Assembly, while its electoral ally, the PSC won 19, leaving the government well short of the majority backing required to implement a “liberal vision agenda” developed by his own Ecuador Libre think-tank.

The report will examine key elements of the new government’s policy agenda and assess the prospects for implementation in light of the legislative arithmetic. The analysis will focus on factors that will have a significant impact on political risk going forward, including the near-term outlook for the oil-dependent economy and relations with the IMF, which extended a financial lifeline to Ecuador in 2020, following the previous government’s achievement of a debt-restructuring deal.

This month’s reporting on Western Europe includes a detailed analysis of Denmark, and another on the United Kingdom, where we assess the risks to investors, post-Brexit, in light of the evolving pandemic. Our report looks at how the UK is progressing on vaccine deployment as well as opening up the economy again as summer approaches, and how the UK’s political risks have been affected by these developments. We analyze the results of the elections held in May for local councils, mayoralties, and devolved assemblies (plus one important by-election) and what they say about the UK’s political map, Prime Minister Boris Johnson’s future, and his overarching campaign of “levelling-up” the country by targeting northern regions for investment. Our report looks into the tensions between the four constituent parts of the UK as well as emerging macro-fiscal risks, focusing in on the government’s finances, incipient inflation, and the interest rate path, with an eye on the implications for UK assets and pound-sterling. Our report also devotes some attention to the UK’s foreign policy, including prospective trade agreements outside the EU, struggling economic sectors, and rising credit risks given the extensive period of record low interest rates and pandemic liquidity support boosting the housing market and making commercial banks more vulnerable to potential loan-losses.

Coverage of Eastern Europe will include an update on Kazakhstan, where President Kassym-Jomart Tokayev has pledged to focus more closely on promised reforms as the health and economic crises created by the COVID-19 pandemic recede. The update will discuss what the steps taken so far suggest about the broader aims of the reform agenda, and what further action is necessary to establish a strong foundation for long-term political stability and otherwise reduce the risks for investors.

Over in Asia we look in detail at how Indonesia, one of the region’s more populated and enticing emerging markets, is coping with the C-19 crisis, and in turn how this is affecting its domestic politics during Joko Widodo’s second presidential term through to 2024. As well as evaluating the progress on vaccinations, which is key to keeping the economy flowing, we also look into more fundamental political and institutional risks that are affecting Indonesia’s country risk profile. They include the recent dismissal of 51 key employees from the Corruption Eradication Commission and what it says for tackling graft, maintaining harmony between the various parties in government and ultimately Jokowi’s reputation. Our report also analyses the country’s role in resolving the crisis in Myanmar, ongoing tensions fueled by religion and Papuan separatism, progress towards climate change goals, and the EU’s plan to eventually put a ban on palm oil imports which will impact on Indonesia’s trade and its relations with fellow producer Malaysia. On economic risk, we look at the prospects for economic growth in 2021-2022, by evaluating the effectiveness of the Omnibus Law on Job Creation, as well as other fundamental variables, including inflation and external payments imbalances all influencing the rupiah given the prospect of monetary policy tightening in the US driving capital outflows.

Our extensive coverage of Sub-Saharan Africa includes fully refreshed reports on oil producers Angola, Cameroon and Gabon, looking at the nuanced domestic political risks as well as the effects of pandemic control on the various economies and the outlook for key macro-fiscal-external risk indicators in the light of recent commodity price trends. Our coverage is complemented with a revised report on high-risk Zimbabwe as we assess both political and economic factors that are pertinent to potential investors. Three-and-a-half years on from the seemingly unending reign of terror propagated by Robert Mugabe, we look into how his party successor Emmerson Mnangagwa – who is affectionately termed “the crocodile” for his political cunning – appears to be following a similar tyrannical path by making subtle changes to the Constitution and tightening the democratic space to quell any opposition. In that light, our report looks at the implications of a recent attempt to extend the rule of the retiring Chief Justice, Luke Malaba, and how the government’s response to the main opposition’s Agenda 2021 campaign to gain more voters will pan-out. We also assess the implications of government interference in the economy and assessing in particular the risks of social tensions erupting again given that local trading companies have lately warned of raising their prices to absorb the higher costs of new exchange rate regulations.

Turning to the Middle East and North Africa, the roster for June features new reports on Tunisia and Iraq, where parliamentary elections that were to have been held this month have been delayed until October.  The domestic unrest that led to a mid-term change of prime ministers continues to simmer, but the recent arrest of a prominent Shiite militia leader and Prime Minister Mustafa al-Kadhimi’s refusal to yield to an armed show of force by members of his militia aimed at securing his release marks a potential watershed in the long struggle to uphold the rule of law.

Electoral reforms approved late last year create the possibility of parliamentary gains for new parties that eschew the ethno-sectarian tribalism that is a key contributor to the deep political dysfunction that has so troubled the country since the toppling of Saddam Hussein’s Baathist regime in 2003. Nevertheless, risk levels will remain high, and our analysis will include an in-depth examination of the key threats affecting the climate for investment and trade.

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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