Coming Soon in Our October 2021 Political Risk Reports

PRS’ coverage of the Americas this month includes a fully revised report on El Salvador and updates on Bolivia and the United States, where political polarization is impeding the national effort to bring the COVID-19 crisis under control and has raised the specter of a completely unnecessary sovereign default that Treasury Secretary Janet Yellen has warned would carry a very high risk of propelling the economy back into recession. Fading confidence in President Joe Biden’s ability to manage the health crisis and steer the economy to a strong and sustainable post-pandemic recovery has contributed to a weakening of his popular support, which has also been dented by his administration’s incoherent response to a southern border crisis and an ill-conceived and poorly planned withdrawal of US forces that resulted in the Taliban’s return to power in Afghanistan.

In addition to examining the risk implications of those immediate crises, the update will also assess Biden’s prospects for securing approval of his $3.5 trillion spending program, the fate of which is clouded by divisions within his own party that have compounded the political challenges stemming from the obstruction of the congressional opposition. The analysis will also include a discussion of the implications for the Democrats’ chances of retaining their slim majorities in both legislative chambers at next year’s mid-term elections and how a victory for the Republicans would affect both the policy agenda and political stability more generally in the run up to the 2024 presidential election.

This month we also include a raft of reports on various locations in Asia, analyzing the latest developments and outlooks for New Zealand, Myanmar and Singapore, as well as Taiwan where tensions with China are once again center stage as both sides accuse each other of military provocations which threaten to spiral out of control. We consider how geopolitics in the region is likely to shape-up, bearing in mind the recent change of leadership in Japan following the appointment of Fumio Kishida, and in the US since the Joe Biden administration was formed.

Our Taiwan report looks in detail at how China’s aggressive response will play out on the domestic political scene in terms of the popularity of the two-term President, Tsai Ing-wen, and her Taiwanese nationalist and center-left Democratic Progressive Party, which has a solid majority in the Legislative Yuan and a mandate until 2024. We look into the recent heightened political debate between the ruling party and the main opposition party, Kuomintang – notably where it is running local governments – concerning the country’s pandemic control following a summer surge in C-19 cases. These have pointed the finger at lax controls and a slow vaccination rate due to delays receiving shipments and some initial hesitancy among the population unduly concerned by unsubstantiated reports of dangerous side effects. We look into recent speculation that President Tsai is also considering a shake-up of her cabinet which would include replacing the Premier (Prime Minister equivalent), Su Tseng-chang, due to the government’s Covid response and the economic hit. On that, we project out economic growth and other relevant macro-fiscal indicators, and we look into current global issues ranging from China’s slowdown to semiconductor production and inflation, all influencing Taiwanese assets.

Along with a fully revised report on Finland this month, our coverage of Western Europe delves into the political and economic risks facing investors in Ireland. As well as evaluating the state of the parties in the context of the Dublin Bay South by-election held in July, our report evaluates the government stability and policymaking outlook as C-19 restrictions are further eased, and in light of the government’s budget for 2022 unveiled in October by Finance Minister Paschal Donohoe against the backdrop of a new National Development Plan containing details of major investments to assist Ireland’s recovery from the pandemic. Our report also looks into progress on the OECD’s plans to provide a level playing field for corporate income tax, which will have major implications for Irish investors that have been long-used to a more favourable levy vis-à-vis other European jurisdictions. We analyze the post-Brexit trade arrangements which the UK government is once again threatening to upend, and we delve into the latest corruption and money laundering issues bedeviling the Irish authorities. Our report rounds out with an up-to-date assessment of the main macroeconomic risk indicators, including prospects for economic growth, the deficit and debt burden, and not least the current spectre of inflation bearing down on global country risk profiles.

Coverage of Eastern Europe will include a fully revised report on Bulgaria, where the inability of the parties in the National Assembly to form a viable government has necessitated the scheduling of the country’s third parliamentary election of 2021 on November 14, to be held concurrently with the presidential election. The report will examine the possible paths forward in the likely event of another inconclusive election result and assess how the formation of a weak and unstable government might affect the risks that would arise from a continued delay in forming a fully functioning administration. Special attention will be given to the obstacles to sustaining a post-pandemic economic recovery, relations with the EU, and Bulgaria’s prospects for making effective use of the significant financial support that is available under the EU budget and from the bloc’s large pandemic-recovery fund.

Turning to the Middle East and North Africa, the roster for October features a fully revised report on Oman and an update on Morocco, where a general election held on September 8 resulted in near wipeout for the moderate Islamist PJD, which has headed the government for the last decade, and the formation of a center-right coalition government made up of three monarchist parties (the RNI, the PAM, and Istiqlal) that control a two-thirds supermajority in the 395-member House of Representatives.

The parliamentary strength of Prime Minister Aziz Akhannouch’s coalition and the prospect of a less contentious relations between the government and King Mohamed puts the new government in a strong position to implement an economic development strategy proposed by a royally appointed commission that focuses on reducing the government’s direct role in the economy by privatizing public-sector enterprises while increasing state investment that supports the expansion of the private sector.

The update will examine potential impediments to progress on the development strategy, including the financing risks stemming from the sovereign’s loss of its investment-grade credit rating amid the economic havoc caused by the COVID-19 pandemic and the need to balance pressure to rein in the large budget deficit against the electorate’s high expectations of bold action to fulfill the RNI’s promises to create 1 million jobs, provide health insurance for all Moroccans, and guarantee a pension for the elderly. Our analysis will also include an assessment of the security risks associated with the simmering Western Sahara dispute.

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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