Coming Soon in Our July 2022 Political Risk Reports

PRS’ coverage of the Americas this month includes reports on Mexico, Venezuela, Chile, and Brazil, where former President Luiz Inácio “Lula” da Silva is poised to be returned to the top office at elections scheduled for October. The most recent polling numbers show Lula, the founding leader of the left-leaning Workers’ Party, holding a double-digit lead over the conservative populist incumbent, Jair Bolsonaro, and suggest that he will easily defeat Bolsonaro in a likely run-off contest. The report will examine how near-term economic difficulties might affect the priorities of the government at the start of the new term, as part of a broader analysis of the policy implications of the anticipated change in administration, which also will consider the barriers to obtaining majority backing in what figures to be another highly fragmented Congress.

Coverage of Western Europe includes a report on Switzerland and an in-depth look at the political machinations occurring in the United Kingdom in recent days that have placed Prime Minister Boris Johnson’s tenure in jeopardy. The report assesses his prospects of surviving amidst heavy local election losses, double by-election defeats, and the never-ending spate of scandals pointing an accusing finger at honesty, organization, and transparency in No. 10 Downing Street.

The report goes on to assess how this will all play out in the coming months in terms of the government’s agenda, bearing in mind the UK’s deficit and debt problems and the fact that soaring inflation is beginning to have a major impact on industrial relations. PRS also considers the seemingly intractable devolved issues concerning the Northern Ireland protocol and the thorny issue of Scottish independence following the recent decision by First Minister Nicola Sturgeon to unilaterally announce a date for a second referendum (in 2023) and to force the Supreme Court to adjudicate on it.

Finally, we will look into the pressing economic problems investors must take into account, not least the rise in food and gas prices, and ultimately borrowing rates heightening the risks of recession and a housing market reversal, not to mention the UK’s foreign policy difficulties given rising protectionist policies, and ongoing tensions with China, Russia, and other hard-line regimes.

Coverage of Eastern Europe will include a report on Slovakia, where tensions among the partners in the center-right coalition government headed by Prime Minister Eduard Heger show no sign of abating. Internal squabbling has persisted, even against the backdrop of crisis created by the war in Ukraine, and it appears that a shared aversion to chancing an early election that could cost them parliamentary seats and a share of power is the main glue holding the alliance together. Elections are not required for nearly two years, and the availability of loans and grants from the EU’s recovery fund will provide the incumbents with an opportunity to boost their standing by engineering a strong and sustained economic rebound.

The report will assess the prospects for success on that front, which implies the implementation of reforms designed to improve the climate for investment and an aggressive push to reduce corruption. The analysis will also examine the implications of near-term economic difficulties for both the stability of the current government and the medium-term policy agenda.

Turning to the Middle East and North Africa, our coverage in July will include reports on Syria and Egypt, where President Abdel Fattah El-Sisi has initiated a national dialogue that includes all political factions except the Muslim Brotherhood. The stated aim of the exercise is the founding of a “new republic,” but Sisi’s objective is best understood as creating a basis for broad-based acceptance of the restoration of authoritarian rule. Sisi has pointed to economic rejuvenation as vital to the success of his political project and has promised an expanded role for the private sector in economic affairs, to be accomplished in part through an aggressive program of privatization.

In addition to assessing the risk implications of the dialogue process, which kicked off in early July, the report will discuss the specifics of the government’s economic strategy and highlight the sectors in which the potential for fresh investment opportunities is likely to be greatest. More generally, the report will examine the outlook for security, including the danger of regional conflict related to Ethiopia’s controversial Nile dam project, and will include an assessment of the near-term economic risks stemming from the steep rise in prices for fuel and food.

Over in sub-Saharan Africa this month, in addition to a report on Kenya, we feature South Africa where the political scene is already shaping-up in anticipation of a hotly contested general election in 2024, and where investors are hoping for renewed impetus on reforms in return for much-needed financing from the IMF. 

Amid these hopes, the country still has devilishly high unemployment, stretched fiscal resources, insufficient electricity, and an inflation problem that is gripping other countries, which will only exacerbate an already high crime rate and spark industrial conflict as lawlessness and poverty rates climb. Our report explores these economic issues, and prospects through to 2023, as load-shedding by the state-run electricity monolith Eskom risks dragging the country back into recession, pressuring the rand and undermining creditworthiness.

PRS will also focus on the government’s drive to come to grips with corruption and the state capture that were very much a feature of the Jacob Zuma regime and assess how all this will play out on the domestic political scene in view of the recent scandal enveloping President Cyril Ramaphosa that he covered-up the theft of millions of dollars from a commercial game farm that he owned. Our report goes on to note whether the ongoing investigation into this, coupled with rising xenophobia among the nation’s impoverished black community, will spark a populist backlash.

Across the wide expanse of Central to Southeast Asia this month, we include detailed reports on Australia, Hong Kong, and Malaysia, looking at their respective local politics, pandemic management challenges, foreign policy issues, and economic pressures caused by fewer tourists, the war in Ukraine, and supply-chain constraints arising not least from China’s zero-COVID policy. In addition, this month, our coverage is expanded with an inaugural report on Uzbekistan, looking at the risks to investors tempted into the formerly off-radar, statist and authoritarian nation by the changes ushered-in by the reformist president Shavkat Mirziyoyev, who was re-elected in 2021.

In what is a shorter report supplementing the analysis and data coverage of an enhanced total of 141 developed, emerging and frontier markets in our International Country Risk Guide, we review recent deadly protests in the country’s autonomous north-western republic of Karakalpakstan sparked by President Shavkat Mirziyoyev’s pursuit of constitutional change. Our report assesses the details of the charter amendment, and the regime’s enticing privatization drive, as well as presenting forecasts for the key macro-fiscal variables to provide an up-to-date assessment of the economic outlook for one of the world’s more sparsely covered, but nevertheless increasingly interesting investor domains.

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.