PRS’ coverage of the Americas in July includes an assessment of risk in Ecuador, where President Rafael Correa is scrambling to make up a massive revenue shortfall resulting from the slide in global oil prices, while simultaneously attempting to fend off pressure from a reinvigorated opposition. PRS will discuss the implications of the fiscal squeeze for political stability in the near term, as well as for the next round of elections that falls due in 2017. In addition to a general assessment of the risk that the leftist president’s political troubles will encourage populist policies that are detrimental to investors, the report will analyze the potential impact of the recent introduction of a new electronic currency, a move that suggests a weakening of Correa’s commitment to maintaining the long-standing dollarization policy.
Turning to the Middle East and North Africa, PRS will produce an updated report on Israel, where Prime Minister Binyamin Netanyahu has formed a right-wing coalition government that depends for its survival on The Jewish Home, a nationalist party that has positioned itself as the champion of Israeli settlers in the West Bank, and strongly opposes a two-state solution to the Palestinian conflict. Our analysis will assess the prospects for the survival of the multi-party coalition, focusing in particular on the risks in that regard from the positioning of Ayelet Shaked, a very controversial figure from The Jewish Home, as minister of justice, and the return to government of the ultra-Orthodox Shas, whose insistence on special consideration for its constituents, especially with regard to social spending, figures to greatly complicate the formulation of fiscal policy.
Our extensive coverage of sub-Saharan Africa this month includes a detailed report on Ghana that willlook at how the ongoing economic crisis might influence policy-making in the period leading up to presidential and legislative elections in late 2016 (to be preceded by district level elections this September). The analysis will examine the devastating effects of weakened commodity prices on the country’s fiscal metrics, assess the implications of a recently concluded IMF program for inflows and the currency, and assess the challenges for authorities as they simultaneously attempt to manage public protests while also regaining the trust of foreign investors amid a heightened risk of debt distress. Our report looks into the recent campaign to increase transparency to address corruption, investigates the oil sector outlook, and assesses the prospects for boosting real GDP, which is presently being propped up by agricultural production, containing double-digit inflation, and reining in the deficits in the fiscal and current account balances.
Continuing the election theme this month, we also cast the spotlight on Côte d’Ivoire, where President Alassane Ouattara is seeking re-election in October, which is sure to raise tensions, although the decision of the opposition to participate in the poll will mitigate the risk of destabilizing conflict. Our report looks at the country’s prospects beyond the poll through to 2016, highlighting in particular the growing risk of importing Islamist terrorism from neighboring states, and analyzing whether the nation’s strong economic growth and the momentum behind reforms can be sustained. Our report looks at the outlook for cocoa and other commodities on which economic health depends, and explores the implications of a series of oil-sector disputes, including an exploration injunction sought against Ghana, another sub-Saharan market that PRS is covering this month. Our report furthermore looks at medium-term government spending commitments, including the administrative and security-related costs of staging elections, and how these, in conjunction with debt relief and new sovereign bond issuance, will affect repayment capability.
Our coverage of Western Europe this month casts the spotlight on Norway, which has been long regarded as one of the world’s lowest risk investor domains, but which is also one dominated by an offshore hydrocarbons extraction industry now struggling to cope with lower oil prices. We look at how investment cuts by the petroleum majors are rippling out along the supplier chain, affecting not only oil-dependent cities like Stavanger, but seemingly also the wider economy, which with unemployment now gradually rising is putting Prime Minister Erna Solberg’s two-party, right-leaning minority coalition government under pressure to react. We assess what investors might come to expect in terms of the typical policy response, focusing on the recent revised budget for 2015, tax reform and other potential plans in the pipeline. We look at the monetary policy reaction function from Norges Bank (Norway’s central bank) affecting borrowing rates and prospective krone exchange rate trends, seek to discover whether rising credit risk can be successfully managed by the financial regulator and round out with an assessment of the main economic indicators to assess economic growth, inflation and balance of payments trends.
Looking at Eastern Europe, PRS will issue a new report on Russia, where President Vladimir Putin’s government is tightening its control against a backdrop of heightened diplomatic tensions and a badly struggling economy. Although Putin remains very popular, increased restrictions on the media and a shakeup of personnel at the top of the security apparatus is indicative of growing anxiety among the political leadership that popular sentiment could turn against the president if conditions to not improve fairly quickly. The report will assess the prospects for a thaw in relations between Moscow and the EU, and examine the implications for Russia’s economic health and business climate, as well as broader regional stability, if tensions persist and sanctions imposed in response to Moscow’s actions toward Ukraine are not lifted.