Coming Soon in Our November 2019 Political Risk Reports

PRS’ coverage of the Americas this month includes fully revised reports on Guyana and Mexico, both of which are facing political hazards that will heighten risk in the near term. In Guyana, a political crisis triggered by a dispute over the validity of a vote of no-confidence in the coalition government headed by President David Granger appears to be headed for a resolution with the scheduling of a general election for March 2020. However, with the country poised to receive a massive oil windfall, both the incumbent alliance of APNU and the APC and the opposition PPP-C can be expected to pull out all the stops to secure victory. As such, what is expected to be a closely fought contest promises to be a vicious affair that will very likely turn violent, and there is a high probability that the loser will challenge the result, quite possibly in militant fashion. The report will assess the dangers for foreign investors that are likely to emerge under either outcome, as well as the specific risks that will be present under alternative regime scenarios.

The analysis of risk in Mexico will include a discussion of how President Andrés Manuel López Obrador’s record during his first year in office stacks up against the high expectations that greeted his landslide election last year, and an examination of the president’s policy options as external factors and eroding investor confidence create obstacles to reviving an economy that is forecast to slow to a near standstill in 2019. The report will assess the implications for political stability if AMLO were to tack toward the middle and adopt a more liberal policy stance, as opposed to maintaining the populist and state-centered approach that he has favored so far. In addition to weighing the probability of those scenarios, the report will include a detailed discussion of how the pursuit of either course could be expected to affect the broader business climate and economic performance over the five-year forecast period.

In our coverage of Western Europe this month we feature the Netherlands, Norway, and a smaller update on Iceland. We also look in detail at investor risk in Ireland in the wake of the UK government’s Withdrawal Agreement Bill containing a soft border along the Irish Sea—presently awaiting parliamentary approval, pending a general election—given its implications for cross-border relations wrapped-up in the Belfast/Good Friday Agreement. Our report assesses how Brexit will likely impact on the domestic scene in Dublin, as we also take a closer look at the recent “phantom voting” scandal involving Micheál Martin’s Fianna Fáil, seemingly enveloping other politicians ahead of the next parliamentary elections which are likely to be held sooner than the official deadline of April 2021, but are ruled out for this year by the Taoiseach (Prime Minister), Leo Varadkar. Our report looks at the various possible election outcomes, and also delves into the economic implications of Brexit scenarios ahead of the new deadline for the UK’s departure on January 31, likely avoiding a no-deal, against the backdrop of a weak global economy influencing Irish trade and GDP. In particular, we assess whether robust trends for retail sales, pharmaceutical exports and sovereign debt reduction are likely to continue through 2020.

Looking at Eastern Europe, PRS will publish an update on Bulgaria, where Prime Minister Boyko Borissov’s center-right GERB is poised to emerge as the clear winner of local elections following a second-round of voting in early November. The resilience of the party’s support, despite a scandal over suspicious real estate deals involving senior government officials and the head of an anti-corruption agency, underscores the degree to which economic factors are influencing the behavior of voters. Unfortunately for Borissov, growing tensions among the leaders of GERB’s far-right partners in government do not bode well for the survival of the fragile coalition. The update will assess the probability of an early election and the most likely outcome, and what that could mean for the policy course and the risks for investors over the medium term.

Coverage of the Middle East and North Africa includes a revised report on Saudi Arabia, where the country’s de facto ruler, Crown Prince Mohammed bin Salman (MBS) appears to have weathered the political damage from his implication in the murder of Saudi journalist Jamal Khashoggi in late 2017, thanks in no small part to the support he has received from the government in Washington. Recent signals that Saudi Aramco is prepared to move forward with a proposed IPO is clearly designed to revive international interest in MBS’ ambitious economic reform program, but both the timeline and the terms of the sale remain vague. The report will include an examination of the factors that are likely to influence investors’ response to overtures from Riyadh, including the heightened security risks arising from the growing danger of an armed confrontation with Iran.

Along with reports on Gabon, Liberia, and Somalia this month, our coverage of sub-Saharan Africa is devoted to an update on Kenya, as we assess political stability during Uhuru Kenyatta’s second and final five-year term to 2022 as the Building Bridges Initiative report spurred by Kenyatta and ODM leader Raila Odinga aiming to unify the country is released recommending constitutional change to be approved via referendum. The process is being eyed skeptically by supporters of Deputy President William Ruto, amid tensions within the ruling Jubilee Party at odds over Kenyatta’s eventual succession pitting the Kalenjin and Kikuyu ethnic groups against one another. Our report looks into how this is playing into the government’s war on graft, which has secured a high-profile casualty following the July arrest of Finance Minister Henry Kotich for alleged illegalities in state procurement during the award of contracts to CMC de Ravenna, an Italian company, for building two dams. Our report also looks at regional foreign policy issues likely to affect investors, including separate moves to bolster trade with South Sudan on the one hand, and Tanzania on the other. We look at recent maneuvers in the telecoms market, improvements to transport infrastructure, the outlook for cash crops, and the implications of imposing a new public debt cap amid talk also of repealing interest rate controls. In light of these issues we make an informed judgement on prospects for GDP growth, inflation, the fiscal deficit, external economic risk indicators, including the exchange rate, and ultimately Kenyan asset security.

Our coverage of Asia this month includes a brief but timely update on North Korea in light of the stop-start nature of denuclearization talks as we look at what’s next for the Kim-Trump détente and its impact on South Korean assets and North Korea’s ambitions, not least in terms of prospective tourism development. Our coverage also includes detailed reports on Myanmar, as well as Malaysia, where the Pakatan Harapan (PH) coalition would appear to be in a strong position politically with the opposition Barisan Nasional now a fractious alliance in the wake of the 1MDB scandal sparking its downfall, and another general election not due until 2023. Our report nevertheless probes deeper as we look to the succession issue surrounding the veteran Prime Minister Mahathir Mohamad with the handover to his heir-apparent Anwar Ibrahim in 2020 appearing questionable given the talk of rival bids, notably from Azmin Ali, who is expected to challenge Anwar for leadership of the People’s Justice Party, the largest constituent party of the PH. We look in more detail at waning support for the government, and the prospect of a long-awaited cabinet reshuffle, to gauge how this will all have a bearing on government policy and the outcome of the Tanjung Piai by-election in mid-November providing another test of popularity with pro-Malay parties willingly cooperating. Our report rounds out with a review of recent and prospective developments in key macro-fiscal indicators, honing in on the GDP growth outlook, fiscal stability, external balance, and emerging markets risk aversion, influencing the ringitt.

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 preview 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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