Political Risk around the Globe
Co-written with other RGE Lead Analysts.
According to the World Economic Forum’s Global Risks 2008 report, 2008 will have the highest levels of political and economic uncertainty for a decade. In the most recent RGE Monitor semiweekly note we discussed economic uncertainty extensively – financial market troubles, the risk of a U.S. recession and its effects on the global economy. Today we concentrate on political risk around the world.
“This is the time of year for bold projections – and one emerging meme is that politics is looming large in the global economy. With global banks turning to sovereign wealth funds, wariness about trade and capital inflows in many developed and developing economies, centralization in several key developing economies, uneasiness about globalization, and commodity/resource nationalism, it makes sense that attention is returning to the role of politics.” Check out the latest piece by RGE’s Rachel Ziemba “Reassessing Risks in 2008” and our coverage “Will Investors Reappraise Political Risk?”
On the eve of President Bush’s trip to the Middle East, a disputed encounter between U.S. and Iranian navies reinvigorated debate on how to respond to Iran’s strategic and nuclear ambitions. An escalation of tensions could prompt further oil price spikes. And with inflation concerns mounting and a reprieve from the recent NIE report, is Ahmadinejad losing domestic support? Check out: “How Might Escalation of Iran-U.S. Tensions Affect Oil and Other Asset Markets?” and “Are Iran’s Economic Policies Ahmadinejad’s ‘Achilles Heel’?”
And political instability exists in many other petro-states. Read: “Iraqi Oil: Output Up, IOCs Circling Amid Political Uncertainty?”, “Venezuelans Hand Chavez Defeat on Constitution: Is Chavez Losing Control?” and “Nigerian Politics, Niger Delta Unrest and the Oil Market”
Political risk in Asia is not just confined to the escalating violence in Pakistan. Myanmar, Malaysia, Bangladesh, Nepal and Sri Lanka have also recently witnessed political tensions. Moreover, uncertainty over government stability prevails in Japan and Thailand; and U.S.-North Korea and U.S.-China relations are still difficult. Finally, this year, elections are due in Taiwan, in South Korea (parliamentary elections) and (possibly) India. All these – not just Pakistan’s – have high international significance. Current and future political developments will have implications on the stock markets, bond spreads, currencies and capital inflows of these economies. Take a look at: “Top Five Election Tradeoffs for 2008”, “Rising Political Tensions in Asia” and “Will Political Turmoil Derail Pakistan’s Growth?”
Also in the Monitor:
*Every Barrel Now Counts: Rising Marginal Cost of Oil and Influence of Marginal Producers
*Pakistan’s Nuclear Weapons Safe Amidst Political Instability?
*Violence Escalates In Kenya As President Kibaki Begins a Second Term
*North Korea Starts 2008 With Missed Nuclear Deadline
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