Coming Soon in Our November 2018 Political Risk Reports

This month’s coverage of the Americas includes new political risk reports on Dominican Republic, Guyana, and Jamaica, as well as an update of Colombia, where there are already clear signs that President Iván Duque, who took office in early August, will struggle to build consensus within the ideologically diverse coalition of parties on which his administration will depend for a legislative majority. That political reality has already forced Duque to backpedal on promises to alter controversial provisions of the previous government’s peace agreement with former guerrillas from the leftist FARC, to the consternation of some of the president’s colleagues in the main governing CD.

Concessions to coalition partners also figure to result in the dilution of proposed fiscal reforms, with potentially negative implications for plans to reduce the tax burden of corporations, a central component of the conservative government’s economic policy strategy. The update will examine the content of the government’s key proposals related to investment and trade, and assess both the likelihood that the administration might see the measures through to passage and the implications of success or failure for market sentiment and economic performance.

Our coverage of Western Europe this month includes updates on the Netherlands and Norway, along with a report on Ireland, where political energies will continue to focus on resolving the vexing Irish border issue before the UK’s formal withdrawal from the EU early next, in what looks to be a hard Brexit. The available options carry are both unpalatable, as one would jeopardize British Prime Minister Teresa May’s relationship with the Northern Irish DUP, which provides the Tory government with its parliamentary majority, and the other would endanger the 20-year-old agreement that has restored peace to Northern Ireland.

Against that backdrop, Prime Minister Leo Varadkar is seeking to renew his minority government’s confidence-and-supply agreement with Fine Gael’s historical rival, Fianna Fail.  Our report will assess the prospects for avoiding a breakdown in negotiations that triggers an early election, and examine the implications in either case for political stability and policy direction, particularly with regard to the overcoming obstacles to implementing the national broadband strategy, improving health care, and resolving the housing crisis.  Our report also assesses the government’s fiscal bill for 2019 in the context of Ireland’s recovery from its banking and sovereign debt crisis, and presents new macro-forecasts for the economy with potential worst-case Brexit scenarios.

Turning to Eastern Europe, this month’s roster includes an update on Russia, where the somewhat disappointing showing of the main governing United Russia at regional elections held in September suggests that domestic discontent is still bubbling beneath the surface, despite the economic lift provided by rising oil prices.  The update will assess the chances that President Vladimir Putin might take advantage of the breathing space created by an anticipated fiscal windfall to implement long-promised reforms that are acknowledged as essential to creating a foundation for rapid and sustained expansion of the non-oil economy, while examining some of the main stumbling blocks, including Moscow’s fraught ties with the west.  In that regard, PRS will explore the implications of recent developments on the foreign policy front, including heightened tensions between Moscow and London over the poisoning of dissident Russians inside the UK, the further deterioration of ties with Ukraine, and a threat by US President Donald Trump to scrap a decades-old bilateral nuclear arms treaty.

Our coverage of the Middle East and North Africa shines a spotlight on Saudi Arabia with an update that examines the fallout from the international outcry over the killing of journalist Jamal Khashoggi, purportedly on orders from Crown Prince Mohammed bin Salman (MBS), at the Saudi consulate in Istanbul in early October.  The update will include an assessment of the potential for the scandal to threaten MBS’ position in the line of royal succession, a risk highlighted by reports that Sheikh Ahmad bin Abdulaziz, the only surviving full brother of King Salman and a vocal critic of the crown prince, has returned to Saudi Arabia from his retirement in London.

Otherwise, the analysis will focus on the implications of the crown prince’s diminished political stock for his ambitious program of economic reform and a foreign-policy strategy designed to bolster the kingdom’s position in a battle for regional supremacy with Iran.  The update will discuss the progress made to date on structural reforms aimed at diversifying the oil-dependent economy, and provide forecasts of economic performance over the next 12–18 months that will include an assessment of the prospects for further advances on the reform front.

This month’s analysis of sub-Saharan Africa features reports on Cameroon and Ethiopia, as well as an examination of the political and economic pressures facing the government in Kenya, where President Uhuru Kenyatta has nearly completed a year of his second term. Kenyatta’s overtures to his main adversary, Raila Odinga, and his Big Four Development Agenda carry the promise of promoting both political stability and economic advancement in the near term, but disagreement among the power brokers of the dominant Kikuyu ethnic group over whether to support the presidential ambitions of Deputy President William Ruto, an ethnic Kalenjin, figures to aggravate factional tensions within the governing party as the next election cycle draws nearer. The report will examine the potential for that issue and others, including a looming battle over constitutional reform, to heighten political risk over the medium term.  The analysis will also include an assessment of economic prospects in light of the government’s fiscal reforms and the IMF’s recent warnings about sovereign debt sustainability.

Looking at Asia, we will publish reports on Myanmar and North Korea this month, as well as Thailand, where the military-backed government is promising to stage elections in the first half of 2019.  The elected administration will govern under a new constitutional devised to preserve sufficient influence for the military to prevent a repeat of the political upheaval that triggered a coup in 2014. Our report looks into the evolving scene to assess the electoral prospects of pro-democracy and military-aligned political forces, and will explore the potential for new parties to challenge what has for nearly two decades been a duopoly dominated by the populist Pheu Thai Party, the political organization of loyal supporters of exiled former Prime Minister Thaksin Shinawatra, and the pro-establishment Democratic Party.  The analysis will also include an evaluation of the policy agenda for the next 12–18 months, and the prospects for the economy in light of global and regional developments, focusing on key risk indicators, including the fiscal metrics, and the likely reaction of the currency to economic and political change.

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, or explore a subscription to PRS Online and/or ICRG Online today to receive political risk updates.

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