PRS kicks off December’s coverage with a report on Vietnam: a frontier market tipped years ago as an investor hot-spot that has not managed to shake off its high-risk reputation. The report sums up the evolving constitutional process, which is significant not only for any prospect of democracy evolving in one of the world’s few remaining bastions of communism, but also for the CPV regime’s long-term survival. We also assess what recent high-level Cabinet appointments imply, not just for government stability, but also for the country’s investor reputation, by focusing on the Trans-Pacific Partnership trade talks and Russian diplomacy. In addition to looking ahead to see what 2014 will bring in terms of economic developments, we analyze the efficacy of moves to resolve the banking crisis and what they portend for fiscal stability as the government’s budget numbers worsen.
Our coverage of the Americaswill include an update on Peru, where President Ollanta Humala gives every indication that he remains committed to pursuing an investment-friendly policy course, despite an erosion of popular support that has generated pressure to adopt a more populist approach. Humala appointed his fourth prime minister in a little more than three years in late October, naming Cesar Villanueva, a former regional president of San Martin, a move seen as aimed at improving the central administration’s relationship with provincial leaders. One of the new prime minister’s main challenges will be finding a way to resolve conflicts with local communities that have stalled progress on a number of major mining projects, a task that has become a top priority as the weakening of minerals exports has put the country on track to record its first trade deficit in more than a decade. PRS will assess the outlook for success in that regard, and the update will also discuss the prospects for implementation of legislative proposals aimed at creating a more attractive climate for investment, particularly in the mining sector.
Turning to Africa, opposition parties in Angola recently organized some of the biggest anti-government protests since the end of the civil war in 2002, against a backdrop of unconfirmed media reports of the failing health of the country’s long-serving leader, President José Eduardo dosSantos. The protests are aimed at raising pressure on the MPLA government as it prepares for an eventual transfer of power from dosSantos to a younger successor. However, the president once again refused to even hint at his plans for succession in a recent media interview, and by all accounts remains firmly in power. Although PRS believes the chances of the opposition forcing meaningful political change are minimal in the short term, the uncertainty surrounding the timing of a leadership transfer creates the risk of further unrest, accompanied by state repression, in 2014.
PRS will also review the components of a draft bill for the 2014 budget, which is expected to receive final parliamentary approval in mid-December. The government was forced to revise down its growth forecast for 2013 to 5.1% from 7.1%, but the macroeconomic outlook remains stable, if vulnerable to external shocks to the country’s oil industry. Oil production is failing to meet official targets, but exploration should increase with a new licensing round scheduled for the first quarter of next year. Discussion of the outlook for the oil sector will include an analysis of the effect of a new consumption tax of up to 10% that will drive up the costs of exploration.
Our coverage of the Middle East and North Africa will feature a revised report on Iraq that will focus on the prospects for creating a stable and inclusive government following elections that fall due in April 2014. All parties recognize that government representation for all three of the country’s main ethno-religious groups is crucial to preventing a wholesale breakdown of civil order, but both the deeply ingrained hostility between the main Shiite and Sunni blocs and conflict between Baghdad and Erbil over control of oil supplies in the Kurdish-controlled north pose serious obstacles in that regard. The report will assess the prospects for staving off a national political crisis and highlight the risks inherent in the failure of political leaders to do so, examining the risks and opportunities for investors under the alternative scenarios.
Looking at East Europe, PRS will issue an update on Hungary, where the populist Fidesz government headed by Prime Minister Viktor Orbán is poised to win re-election next May, although a poor economic performance and doubts about Orbán’s commitment to democracy will likely cost Fidesz its super-majority. Our analysis will include an assessment of the likelihood of further populist measures under another Orbán-led administration, taking into consideration the distinct possibility of fresh financing constraints as the eventual initiation of monetary tightening in the US dampens the appeal of investment in emerging markets.
Our Western Europe coverage this month visits the United Kingdom to assess the government’s fiscal record in the light of another “autumn statement” containing its latest plans for tackling the deficit and debt burden. We look at recent tensions between the Conservatives and Liberal Democrats, the two governing parties, and assess whether their uneasy partnership can be sustained for the life of the current Parliament (to May 2015).
We tease out the implications of recent moves to restrict the oligopolistic utilities market and to privatize Royal Mail, the national postal service, which could lead to nationalized banks sold off before too long. Other current debates over HS2 (an ambitious, but highly contentious, high-speed rail program), the future of Scotland, which will stage an independence referendum next September, and the UK’s uneasy role within the EU, are analyzed on the basis of their implications for investors.
Against these difficult political issues, we also delve into the latest economic data now showing improvement to analyze whether the UK is back on track, taking into consideration the rapid recovery in the housing market, which has raised concerns that the improvement is illusory, and the Bank of England’s plans to tighten monetary policy.
We also release our latest update on France, where a deeply unpopular Socialist Party majority government led by President François Hollande is still resisting the wide-reaching structural reforms required to tackle the country’s acute fiscal problems, made worse by a weakened economy, as political pressures from left and right show no signs of abating. PRS will assess the prospect of increased social unrest in the wake of an eco-tax revolt in Brittany, especially in the light of an official report released warning of instability and tensions due to falling incomes, high unemployment, and tax hikes. We assess what this and forthcoming austerity measures budgeted for 2014 will mean for business operating risks and government stability (with Hollande’s tenure on the line), whether the government’s policies will alter, and if investors can take any comfort at all from the prospect of an economic revival next year following another year of worrying statistics.
For details Contact Us, or purchase a subscription to PRS or ICRG today to receive full updates.