PRS begins its November coverage of Asia with a report on Myanmar. After a resurgence of violence against Muslims throughout the fall, President Thein Sein is trying to broker a peace accord between ethnic groups. PRS will analyze the prospects for an agreement while also addressing the implications for the president’s political reforms. For much of his tenure, Thein Sein has tried to steer Myanmar on a new course, transforming much of the political environment. However, the persistent violence suggests signifi cant obstacles remain to reducing political and societal turmoil.
Our coverage of the Americas will include an update on Venezuela, where the government headed by President Nicolas Maduro is struggling mightily to contain the mounting economic problems created by more than a decade of socialist policies implemented under his late predecessor, Hugo Chávez. A combination of surging infl ation, widespread shortages of staple goods, a growing crime problem, and tight foreign exchange restrictions are sowing discontent and strangling economic activity.
Maduro faces some tough policy choices in the coming months, and our analysis will focus on the political pressures he will contend with as he attempts to steer the economy through the hazards of dwindling liquid reserves, troubles in the key oil sector, and obstacles to securing external fi nancing. Foreign fi rms are already encountering diffi culties obtaining the dollars required to purchase imported inputs, and face a growing risk of being hit with punitive measures as the government looks for scapegoats to blame for deepening economic diffi culties, which will be compounded in the near-term by what appears to be an unavoidable looming devaluation of the bolivar.
Turning to Africa, a bitter split in the ruling People’s Democratic Party in Nigeria has presented President Goodluck Jonathan with his most serious political challenge yet. Northern governors have made common cause with the president’s chief rival in the oil-rich Delta Region, demanding that Jonathan publicly declare he will not seek re-election in 2015. The party rebels are setting up a parallel organization, and although Jonathan loyalists maintain power on the federal level, the ICRG believes there is now a realistic possibility of a defi nitive break-up of the ruling party. The report will look at the signifi cance of these developments for political stability and the prospect of political violence in the coming months.
At the same time, Nigeria’s oil industry is losing almost one-fi fth of its production to theft and corruption, a situation that will require revisions to the government’s output projections in the 2013 and 2014 budgets. The report will review the oil majors’ response to a precarious security situation in the Niger Delta, and to the government’s policy of promoting local ownership in the industry. ICRG will also look at the Central Bank of Nigeria’s policy options in light of infl ationary risks generated by an expected spike in spending in the election year.
And in Cameroon, the ruling People’s Democratic Movement swept the legislative and municipal elections in September with over 80% of the vote, a widely expected landslide given President Paul Biya’s long-running dominance over Cameroon’s politics. The opposition remains a marginal force, and ICRG maintains its forecast of a high level of political stability in Cameroon over the mid-term. However, while the ruling party managed to contain internal tension during the selection of parliamentary candidates, the potential for factional strife will increase as the question of who will succeed the 82-year-old president once again comes to the fore.
Cameroon’s growth rates are consistent but unremarkable, constrained by a combination of weak business environment, inadequate infrastructure, and poor execution of public investment projects. The fi scal defi cit will widen in 2013, partly due to lack of progress on key reform items, such as the gradual dismantling of a costly fuel subsidy system. The external balance and debt profi le are manageable, but the low level of external debt – currently estimated at 9.7% of GDP – will rise in line with increased recourse to foreign borrowing.
Our coverage of the Middle East and North Africa will feature an update on Saudi Arabia that reviews the latest personnel changes within the government and analyzes their possible signifi cance with regard to an approaching transfer of political control to the next generation of princes. Recent reshuffl es have been accompanied by reports of strife at the upper levels of the royal ladder; although rumors of coup-plotting by a bypassed prince are of suspect veracity, recent displays of the government’s intolerance of dissent betray anxiety on the part of the kingdom’s rulers as they lay the ground for a potentially destabilizing inter-generational succession.
Shifting to East Europe, PRS will issue an update on Bulgaria, where the survival of Prime Minister Plamen Oresharski’s minority government is growing more doubtful by the day. The administration has come under heavy public pressure for aggressive action to address the problems of corruption, bureaucratic ineffi ciency, and the infl uence of organized crime within state institutions, but a hostile opposition in the National Assembly poses a potentially insurmountable obstacle for the minority regime. Clearly on the defensive, the government has sought to protect its position by placating the far-right Ataka party, at the risk of damaging the country’s relations with the EU. The update will focus on what the government’s precarious position means with regard to the prospects for reform and, by extension, for the near-term economic outlook.
Our Western Europe coverage this month leads with Italy, as we assess in detail the implications for recent economic policy moves and the country’s investment prospects in light of its latest, chaotic political developments. These include the impeachment of one former prime minister, Silvio Berlusconi and the resignation of another, Mario Monti, from his own party, following his criticism of the lack of reforms in the government’s budget. More signifi cant from the standpoint of political stability, Prime Minister Enrico Letta’s government survived no-confi dence votes in both houses of Parliament, but the fragile left-right coalition remains at risk amid background maneuvers to forge a new centrist group. Our report delves into the implications of all these issues, especially the risks to business dealings of a failure to deal with the country’s fi scal problem, the danger of which will be assessed against the economic outlook, where it is still diffi cult to fi nd green shoots among the declines. The banks, the budget and its regulatory changes affecting business are all reviewed.
We also focus in on the Netherlands this month and assess prospects for the “Grand Coalition” of Prime Minister Mark Rutte’s liberal People’s Party for Freedom and Democracy and the Labour Party, which has seen its popular support crumble in the face of severe austerity and a weak economy that has been undermined by crises in the banking sector and the housing market. With recent opinion polls indicating that the far-right Dutch Party for Freedom is now the most popular single political movement, and is poised for success at next year’s European Parliament elections, we assess moves by the government to forge a stronger centrist political consensus with other, smaller parties that were relied on to pass the 2014 budget bill through the upper house, where the coalition lacks a majority. Our report assesses the impact on business of the government’s budget, which contains deeper spending cuts and more tax rises than were envisaged when it took offi ce a year ago, and dissects the latest economic trends to assess the outlook for Dutch macro-indicators.