Ones to Watch, 16 October 2017

Americas: Macri’s government poised to pass its first electoral test

Sectors: all
Key Risks: political stability; policy continuity

In Argentina, midterm legislative elections will take place on 22 October, with the ruling Cambiemos alliance likely to secure a positive result and strengthen its position in Congress. A successful election will not mean achieving a majority in the lower house of Congress or the Senate, but it will require increasing the number of seats in both the lower house of Congress and the Senate and to at least repeat the results obtained in Buenos Aires province in the 13 August primary legislative vote in which Cambiemos’ candidate Esteban Bullrich secured 34.06 per cent of the vote against former president Cristina Fernandez de Kirchner’s 34.27, a difference of just 20,324 votes. Fernandez de Kirchner is expected to secure a Senate seat. Nevertheless, the overall result is likely to help deepen and consolidate support for President Mauricio Macri’s reforms over the coming years.

Asia-Pacific: 19th Party Congress will hint at China’s future

Sectors: all
Key Risks: political instability; economic reforms

On 18 October China’s highest leaders will meet for the quinquennial National Congress in Beijing, during which 70 per cent of the 350-member Central Committee, the 25-member Politburo and the seven-member Politburo Standing Committee will change. The current Politburo Standing Committee was chosen by Xi’s predecessors, but the new line-up will reflect his choices, with rumours swirling that his confidant Wang Qishan is likely to be promoted to Prime Minister. The Congress may also see so-called Xi ‘thought’ embodied in the Party’s constitution, which would be a clear indicator of the power he has amassed. The party will be tightly managing the country’s stock markets and the value of the renminbi for any fluctuations, so a major economic reaction to the Congress is unlikely. More important will be hints about monetary policy, SOE-reforms and capital controls over the next five years.

Eurasia: New Kyrgyz president amid Kazakh tensions, Russians likely to face MH17 charges

Sectors: all
Key Risks: political stability

Ex-prime minister Sooronbai Jeenbekov was elected Kyrgyzstan’s president with roughly 54 per cent of votes on 15 October. The transition marks the first democratic transition of presidential power in Central Asia but Jeenbekov is seen as a protege, and by some as under the control of, outgoing president Almazbek Atambayev. Major policy changes are not expected. However, Jeenbekov’s victory could see tensions rise with Kazakhstan amid hostile statements in recent weeks by Atambayev. Meanwhile, Fred Westerbeke, the chief prosecutor overseeing the July 2014 shootdown of Malaysian Airlines Flight MH17 over Ukraine, gave his first interview. Westerbeke highlighted that Dutch prosecutors will likely seek warrants for Russian officials involved, although no timeline was given.

Europe: Austria takes rightward turn, Czech election likely to elevate Babis

Sectors: all
Key Risks: political stability

The ANO party of former Finance Minister Andrzej Babis is likely to win the Czech Republic’s 20/21 October legislative elections. However, other leading parties have refused to consider joining a Babis-headed government. Babis is the country’s richest man but fell out with his Social Democratic senior coalition partner at the beginning of the year over a series of corruption allegations. At the beginning of the month police filed fraud charges against Babis, but the new parliament could vote to lift his immunity again. In Austria, Sebastian Kurz, 31, led the Austrian People’s Party (ÖVP) to victory in the national elections with roughly 31.4 per cent of votes. An ÖVP-Freedom Party coalition is the most likely result. The Freedom Party is likely to seek even more hard line positions in exchange for joining the coalition. Victory for Kurz also gives a new powerful voice aligned with Hungary and Poland in the EU.

MENA: Federal forces secure Kirkuk positions increasing tensions

Sectors: oil and gas; trade
Key Risks: riots; civil commotion; political violence; war on land

On 16 October in Iraq federal Iraqi Security Forces (ISF) reportedly secured several key points in Kirkuk city and province after Peshmerga units linked to the Patriotic Union of Kurdistan (PUK) political leadership in Sulaymaniyah withdrew in order to prevent a sharp escalation. Locations now under ISF control include the strategic K1 military base and the adjoining Baba Gurgur oil and gas field on Kirkuk city’s north-western edge. The move follows an order by Prime Minister Haidar al-Abadi Abadi to the Peshmerga to permit joint deployments in Kirkuk under ISF control. The senior leadership of the Kurdistan Regional Government (KRG) has ordered Peshmerga units to only defend themselves in the face of attack. Reports the Iranian government closed its border crossings with Kurdish-controlled territory appear to be partly inaccurate, with some still operating. Further escalation is possible.

Sub-Saharan Africa: National Bank of Ethiopia devalues birr amid forex shortage

Sectors: all
Key Risks: inflation; project delays; foreign currency shortages

On 10 October the National Bank of Ethiopia announced it would devalue the birr by 15 per cent. The move marks the first significant devaluation since 2010 and comes as Ethiopia grapples with a chronic foreign currency shortage that has paralysed many businesses and led to a build up in arrears at others. The devaluation is intended to stimulate exports, improving the flow of foreign currency and in turn reducing the trade deficit. However, the move risks fuelling inflation of basic consumer goods while the cost of importing capital goods for Ethiopia’s large-scale infrastructure projects will also rise. Unable to replace the latter with domestically produced goods, this could mean some delays to non-essential projects while Ethiopia waits for its previous investments to bear fruit.