Coming Soon, February 2023

PRS’ coverage of the Americas this month includes reports on Colombia, Dominican Republic, and Argentina, where opinion surveys conducted ahead of the October 2023 presidential and legislative elections show the center-right Together for Change coalition leading the incumbent leftist Everyone’s Front, but neither polling close to the level that would be necessary to ensure a legislative majority. There is still the possibility of a late shift in voter sentiment once the presidential contenders become known, but both main blocs face a risk of being damaged by bruising internal battles to choose a standard-bearer, and it is not yet clear what impact a recent fraud conviction will have on Vice President Cristina Fernández de Kirchner’s heretofore outsized influence within Everyone’s Front.

In any case, a generalized lack of confidence in the political establishment likely means that the next government will take office with a weak mandate and lacking reliable support in the Congress, regardless of its composition. Our analysis will focus on the implications of a divided government scenario for the risks faced by investors, both in terms of possible adverse policy moves and slow movement to address key deterrents and will also include a discussion of the near-term economic outlook against a backdrop of increased external headwinds and political uncertainty at home.

Coverage of Western Europe features a report on Denmark, where SD leader Mette Frederiksen opted against forming another minority government backed by leftist allies in favor of forming an ideologically broad coalition that includes the Liberals and Moderates. Frederiksen suggested that her government would not be able to achieve the objectives of economic rejuvenation, rapid carbon reduction, and strengthening national defense if it depended on the support of parties of the left, not least because she has proposed offsetting the cost of her reform program by expanding private participation in the provision of some public services, including education and elder care. PRS’ analysis will focus on the new government’s agenda and an assessment of whether Denmark’s most diverse governing alliance in more than four decades can see it through to implementation.

Luxembourg – the location of one of the world’s largest investment fund industries – is also in the spotlight in February, as we look at how high inflation and rising borrowing rates across the euro zone, the relative strength of the euro, and Europe’s regulatory policies are all influencing the Grand Duchy’s prospects. As well as assessing how the rising cost of living, wage indexation, and the relative health of major trading partners will affect the economy this year, our report looks in detail at this year’s general election, to be held in October, and how it will impact on the balance of power, and policymaking, in the 60-member Chamber of Deputies, the unicameral legislature presently controlled by a tripartite coalition government comprising Prime Minister Xavier Bettel’s Democratic Party, the Luxembourg Socialist Workers’ Party and The Greens. Our report also looks into why the country is riskier in terms of perceived corruption, according to Transparency International’s calculations, and what that means for doing business relative to other European domains.

Turning to the Middle East and North Africa, the roster for February features reports on Tunisia and Egypt, where the autocratic government headed by President Abdel Fattah al-Sisi is struggling to restore stability to an economy that has been shaken by the reverberations of the war in Europe. Fiscal strains and heavy pressure on reserves forced policy makers to implement a steep devaluation of the pound and hikes in retail prices for food staples, both of which reinforced soaring inflation that has contributed to increased discontent. The government concluded a $3 billion bailout agreement with the IMF that could unlock billions more in support from regional allies, but the financing is conditioned on implementation of politically risky reforms, including a reduction of the military’s direct participation in the economy.

The report will discuss the government’s policy priorities in terms of meeting the IMF’s conditions, and will assess the prospects for successful implementation of the reform agenda, noting the political hazards that officials will need to navigate along the way. The analysis will also include an examination of recent developments related to Sisi’s foreign policy agenda, including efforts to deepen trade and investment ties with India, and an assessment of the risk potential of Cairo’s involvement in various regional disputes, including an ongoing battle with Ethiopia over control of the Nile water supply.

We’ll also provide a short update on Gulf-state Qatar this month after it successfully hosted the FIFA World Cup tournament in November-December amid the inevitable nagging concerns about human rights. As well as briefly assessing political stability, our report notably looks into the liquefied natural gas industry and its ability to meet the demand from western trade partners that has skyrocketed following Russia’s invasion of Ukraine, by highlighting the importance of gas contracts recently signed with China, and how that blossoming bilateral relationship will impact on geopolitics while also noting Qatar’s regional relations and its diplomatic position with Israel. We go on to discuss the outcome of the recent dispute with the European aircraft manufacturer Airbus, and our report rounds out with an assessment of the country’s economic outlook, focusing on GDP growth, inflation and fiscal prospects for 2023 and beyond.

In sub-Saharan Africa, PRS will update the risk assessments for Congo and South Africa, where President Cyril Ramaphosa avoided impeachment in December, but remains tainted by corruption allegations that figure to weaken popular support for the long-time incumbent ANC at elections in 2024. The report will discuss the risks stemming from the growing danger that the governing party could lose its majority status, including the possible resort to populist pandering, and examine what such a development could mean for investors and pre-election economic performance.

In addition to a look at Guinea-Bissau, PRS will focus on Liberia where we look ahead to the elections to be held in October pitting a powerful, but unpopular president against a weak opposition. Former soccer star George Weah is aiming to secure a constitutionally-permitted second term as president, but against the backdrop of a poorly performing economy, a cost of living crisis, policy failures, and corruption issues tarnishing his record since being elected in 2018. This has seen public protests arise which could be a precursor to wider unrest at the polls. Our report looks into the delayed ratification of electoral reform bills passed in both houses of parliament last October, and localised protests against mining activities for further warnings. On a more positive note, the country retains the support of the IMF in 2023, in the final year of an extended credit facility arrangement, which is underpinning economic reforms and fiscal reserves. With this in mind we assess the nation’s economic fortunes, identifying the country’s strengths and weaknesses.

Finally, our coverage of Asia this month includes reports on Australia, New Zealand, and China, where President Xi Jinping’s consolidation of power was formalized with his re-election to a custom-breaking third five-year term as head of the ruling Communist Party in October. The extension of his tenure now secure, Xi is expected to act with even less restraint in pursuing his political objectives, a prospect that points to heightened risks for foreign companies operating on the mainland, as well as in Hong Kong or Taiwan.  PRS will examine what recent policy departures, including the abandonment of a “zero COVID” strategy, reveal about Xi’s aims, and the analysis will also highlight the risks inherent in concentrating decision-making authority in a single figure, noting particularly the implications for avoiding (or not) an international conflict.

For the month of February, PRS is offering a 15% discount on all risk products.  Please contact us at custser@prsgroup.com for more information.