The UK heads to the polls in a hotly contested election. The US Department of Labor releases April’s unemployment figures. Canada’s largest oil producing province votes on a new government. Opposition forces protest a perceived power grab in Burundi. All this in GRI’s Weekly Risk Outlook.
UK Election Likely to Produce Chaotic Bids for Supremacy
On Thursday, the voters of England, Scotland, Wales and Northern Ireland will cast their ballots for the expected 5-year UK parliamentary session from 2015-2020.
Although many have focused on the Conservatives amid allegations that the party will seek to reduce welfare spending after the election, and Labour, whose candidate has been deemed fairly lackluster, a significant degree of attention has turned to Scotland, where the Scottish National Party could pick up all (or at least a very high proportion) of Scotland’s 59 seats.
Should a true wipeout occur – and it seems likely at this point that while Labour will not receive a majority of seats, it would probably be able to secure a majority with the SNP – several high-profile MPs could lose their positions in the British Parliament.
Jim Murphy, leader of Scottish Labour, is projected to lose his East Renfrewshire seat. Deputy Treasury Secretary Danny Alexander is on track to lose his Inverness seat to the SNP, and Secretary of State for Scotland Alistair Carmichael may also lose to an SNP wave. Both former Chancellor of the Exchequer Alistair Darling as well as former Prime Minister Gordon Brown intend to step down from their seats.
Aside from placing initial negotiations in an extremely awkward position – Ed Miliband stated last week that he would rather not be Prime Minister than make a deal with the SNP – the loss of such significant heavyweights both for the Liberal Democrats as well as the Labour Party could make for more difficult negotiations beyond the 2015-2020 term.
U.S. Releases Unemployment Data
On Friday, the U.S. Department of Labor will release April unemployment figures. Expectations are that approximately 200,000 non-farm jobs were created with a slight drop in the unemployment rate from 5.5% to 5.4%.
This will be an increase in job support from March, where the unemployment rate remained the same and employment only rose by 126,000. Although the development is a positive one, it is unlikely to convince the Federal Reserve to alter its current dovish approach to raising interest rates.
The release of data will follow a series of macroeconomic policy discussions in Washington, DC:
On Wednesday, Federal Reserve Chair Janet Yellen will deliver remarks regarding global economic growth with IMF Director Christine Lagarde.
On Thursday, the Securities and Exchange Commission will hold a closed-door meeting to discuss policy proposals.
On Friday, SEC Chair Mary Jo White will speak at the Investment Company Institute’s General Membership meeting.
Elections in Alberta Could Complicate an Already Difficult Energy Relationship
On Tuesday, Alberta, Canada will hold provisional legislative elections. The Progressive Conservative Party, which has ruled Alberta without interruption for 44 years, could lose its preeminent 70-17 legislative supremacy to both the more conservative Wildrose Party and the ascendant New Democratic Party (NDP).
Many commentators have pointed to a rapidly weakening economy as a chief problem for the oil-driven province: deficits are expected to exceed $4.1 billion this year as a result of the collapse in oil prices, and Premier Jim Prentice has carried out a series of unpopular tax increases that have avoided Alberta’s corporate sector and oil royalties.
In addition, the Conservatives have been roiled by scandal, and NDP leader Rachel Notley has been successful in expanding the NDP appeal beyond Edmonton to create a serious race between the three parties.
The effects of an NDP victory in Alberta could be significant in the energy sector. The region is Canada’s largest oil-producing province and a gateway of energy trade between Canada and the United States, and a chief proponent of the controversial Keystone XL pipeline running from Alberta to Louisiana.
Notley has indicated she will place less government resources behind “unrealistic” pipelines under lawsuit (like the Northern Gateway line to British Columbia), and will consider increasing oil royalties to fix budget gaps.
Additionally, an NDP government in Alberta would likely reduce pressure on the Obama Administration to move more quickly on the State Department review of the Keystone XL pipeline. Both countries have seen increased scrutiny on the safety of the oil industry, which has led to tightened regulations.
Protests Set to Continue in Burundi Ahead of June Elections
Last week, opposition forces gathered in Burundi to hold protests in the capital, Bujumbura, following an announcement from the ruling party CNDD-FDD that incumbent President Pierre Nkurunziza will run again for president on June 26. A 2-day cease to protests will likely end either Monday or Tuesday as opposition forces gather in the capital to denounce what is perceived by many in Burundi and the region as a power grab.
Although there is some dispute regarding whether or not Nkurunziza can run again, regional leaders like Tanzania’s President Jakaya Kikwete have urged President Nkurunziza to abide by the growing consensus that he is ineligible to run for another term and should step down. The President’s allies contend that his first term did not count in the 2-term limit, as he was appointed by Parliament.
The United States and several international organizations have warned that such a move would violate not only the Burundian constitution but the Arusha Accords as well, which ended a 13-year civil war in 2005.
Nkurunziza has held the position of president since 2005, and there are significant concerns that political protests could spark ethnic tensions (the Burundian government has labeled many protestors terrorists).
Over 20,000 Burundians have already fled to neighboring Rwanda and Tanzania in anticipation of significant violence, and any electoral instability could wipe away significant progress in Burundi attained since the civil war ended.
Violence in Burundi has taken a heavy toll on the Burundian economy. The nation was ranked in 2013 as the “hungriest” country in the world, and its commodity-heavy economy (34% of exports are coffee products, followed by 25% gold and 6.6% tea exports) has taken a hit by falling commodity prices and the slowdown of the Chinese economy.
The GRI Weekly Risk Outlook (WRO) provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, the WRO presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
The Weekly Risk Outlook is written by GRI analyst Brian Daigle.