Coming Soon in Our September 2020 Political Risk Reports

PRS’ coverage of the Americas this month includes fully revised reports on Costa Rica, Honduras, and Suriname, where a surprise election result has brought an end to the reign of convicted murderer Desí Bouterse, whose legal status has been a cloud hovering over a country that is poised to enjoy a massive oil windfall but faces a near-term threat of sovereign default as a result of the economic fallout from the COVID-19 pandemic. The analysis will include an examination of the key players in the new coalition government and the policies that can be expected under the new president, Chan Santokhi, the leader of the social-democratic VHP, particularly with regard to dealing with the current economic crisis and managing the country’s untapped oil wealth. PRS will also assess the stability of the governing partnership of the VHP and Vice President Ronnie Brunswijk’s ethnic-Maroon ABOP, and discuss the risks stemming from the still-unresolved legal status of Bouterse, who is appealing his November 2019 conviction.

As well as reports on Austria and Finland this month, our coverage of Western Europe looks at the evolving risks in France, which is now facing deep recession this year caused by an ultra-tight lockdown and is struggling to contain a renewed outbreak of the COVID-19 pandemic putting the healthcare system under pressure and undermining the economy, including tourism. Our report looks at all aspects of the political environment including the local election results in June, and cabinet reshuffle in July, to ascertain what effects they will have on government stability and policy-making as well the potential for recent, small, anti-mask protests to morph into bigger demonstrations of discontent along with growing trades union demands as unemployment rises. On foreign policy, our report looks at President Emmanuel Macron’s influence on the EU’s crisis recovery budget, French asylum policy and the government’s role in Lebanon as well as the potential for a no-deal Brexit and what that might deliver for French business with the time ticking to reach an agreement with the UK. In that light we assess the prospect of a snap election that Macron is currently ruling out, and is not required until April 2022, partially in the context of dismal forecasts for all of the main macro-fiscal indicators that have worsened immeasurably since the beginning of the year, with particular focus on the budget arithmetic and the measures required to resolve the deficit and debt problem.

Coverage of Eastern Europe will include an update on Poland, where a presidential election delayed by the COVID-19 pandemic was finally held in late June, and was decided by an early July run-off in which the incumbent, Andrzej Duda, defeated Warsaw Mayor Rafał Trzaskowski, the candidate of the center-right PO, with barely more than 51% of the vote. The result was much closer than anticipated, a fact that highlights growing dissatisfaction with the conservative PiS government as Poles deal with the economic hardships stemming from the health crisis.

The update will include an examination of how the PiS could respond to the close call and the negative signals from the electorate, assessing whether Jaroslaw Kacsynski’s party might respond by moderating some of its more extreme positions or make use of its sizeable parliamentary majority to further undermine the institutional checks on its political control ahead of parliamentary elections that fall due in 2023. The analysis will include a discussion of how those alternative strategies could affect relations with the EU and the climate for business in the intervening period.

Turning to the Middle East and North Africa, the roster for September includes updates on Morocco and Algeria, where President Abdelmadjid Tebboune has agreed to hold a referendum on changes to the constitution on November 1. The national vote theoretically satisfies a key demand of pro-democracy demonstrators whose protests have troubled the political climate for the last 18 months, with only a brief respite during the early weeks of the health crisis stemming from the COVID-19 pandemic. Tebboune has indicated that revisions will provide for the transfer of substantial executive power from the president to the prime minister, but democracy activists have called for more far-reaching reforms that diminish the political influence of the military and civilian power brokers, and it is an open question whether reforms that are acceptable to the so-called le pouvior will be enough to restore domestic peace.

The update will examine in detail the proposed changes to the constitution and how they might affect policy making if approved. The analysis will also include an assessment of turmoil risks over the next 12–18 months, taking into account the economic difficulties created by the health crisis and a related steep fall in global oil prices. PRS will also discuss the possible impact of the latest economic setback on the government’s willingness to pursue unpopular reforms that are essential to the success of any effort to diversify the oil-dependent economy.

Over in sub-Saharan Africa our coverage includes a detailed report on Ghana this month looking at economic and political stability ahead of the next elections in December, plus another timely analysis on Zambia in the wake of President Edgar Lungu’s recent decision to dismiss the governor of the central bank, Denny Kalyalya, against the backdrop of recession and restricted credit availability. Kalyalya fell foul for allegedly refusing to print money to finance a pre-election spending spree, which invariably led to a round of kwacha selling by an increasingly nervous financial community. Our report looks into the risks lying in store ahead of the next elections in 2021, with Christopher Mvunga, an accountant and Lungu loyalist, now overseeing the monetary authority, with the copper-fueled economy in recession, burdened by a power crisis, and huge uncertainty persisting over mining contracts causing anguish for foreign investors against the backdrop of heightened sovereign borrower risks highlighting a country on the brink of debt default. Our report looks at the prospects for debt restructuring and fully evaluates the macro framework and social instability risks that are likely to emerge in 2020-2021 because of the COVID-19 pandemic.

In Asia this month, as well as featuring developments in Vietnam, we look in detail at the risks to investors in Japan which entered the COVID-19 crisis with an economy weakened by global trade tariffs and a hike in consumption tax, and where the political scene is about to be shaken up following the surprise, but not entirely unexpected resignation of Shinzo Abe after becoming the longest-serving Japanese Prime Minister after ten years and four terms following a recurrence of his poor health. Our report analyses who is in the running and most likely to be selected by the ruling Liberal Democratic Party to succeed him, and what this will mean in terms of political stability, key ministerial appointments, and policy-making in the shadow of “Abenomics” dominating the domestic agenda, which was aimed at reflating and reforming the Japanese economy. Our report also looks into the implications of the COVID-19 crisis, noting the effects on the economy, fiscal metrics, social stability, and ultimately the investor environment (including the outlook for the yen) throughout the remainder of this year through to 2021. We also look at key foreign policy issues awaiting Abe’s successor, notably concerning Japan’s relations with China, the US, and Europe, and a simmering feud with South Korea over wartime reparations affecting bilateral trade and investment.

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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