Presidential election in South Korea could alter geopolitical equations in East Asia. EU Commission growth forecast could put pressure on Greece to adopt reform package. Elections in West Bank held as Gaza postpones their own. Nepal holds elections amid disillusionment with government. Libya negotiations to continue with al-Sisi as deal appears increasingly likely. All in The Week Ahead.
Presidential election in South Korea could alter geopolitical equations in East Asia
This Tuesday, 3 major candidates will vie for support from Korean citizens in the election to replace impeached President Park Geun-hye. All three candidates-Democratic Party candidate Moon Jae-in, People’s Party candidate Ahn Cheol-soo, and conservative Hong Joon-pyo, have advocated for better relations with Pyongyang relative to President Park. This could prove problematic for the United States’ new position of elevated pressure on the North Korean and Chinese governments to limit North Korea’s nuclear endeavors. The controversy over the anti-missile THAAD system from the United States has also complicated the election, with local concerns that the position of the system could open the area to retaliation in the event of hostilities between North and South (there have also been concerns that this will escalate tensions with both North Korea and China).
Moon Jae-in, a human rights attorney, is currently leading the polls at around 42% with the other two candidates each at around 20%. He also narrowly lost in 2012 to President Park, and is widely respected among the South Korean left. His election could lead to an increase in tensions with the United States if a President Moon tries to push the THAAD system out of the country. Among some of the bigger divisions in society borne out by this election are between older Koreans who place security near the top of their list of concerns, and younger Koreans who are more likely to be concerned with economic malaise and job prospects (as well as corruption). Should Moon prevail, it will likely be due to substantial support from this latter group.
EU Commission growth forecast could put pressure on Greece to adopt reform package
This week, the European Commission will release its growth forecasts for the EU member states, in addition to indicating broader macroeconomic assessments. Included in these assessments will be a downward revision of likely Greek growth, from 2.6% to 2.0%, adjusting due to uncertainty surrounding Greece’s undertaking of structural reforms. This downward growth revision is likely to increase pressure on the Greek Parliament to pass a series of reforms necessary to release a tranche of bailout funds for debts due in July.
The reforms affect a wide array of the Greek economy, ranging from taxes to energy and pensions. Although these deals go against the goals of Syriza, the Greek Parliament is still slated to pass the reforms lest it trigger a snap election in which the center-right New Democracy would likely make substantial gains. Aside from the Greek forecast, the Commission forecast of growth for other countries could be important for markets as they make investment decisions. Poor UK growth projections, for example, could push companies that were already considering relocating operations as a result of Brexit to move forward with plans to do so.
Elections in West Bank held as Gaza postpones their own
On Saturday, local elections will be held in the West Bank. These elections had been suspended several times; originally slated for October 2016, the Court of First Instance in Gaza effectively suspended elections by annulling the candidacies of Fatah Party members in Gaza, and were set in January to this weekend. Elections in Gaza (which would have been the first since 2007) were postponed after Hamas and Fatah failed to reach an agreement. This election is reflective of widening divisions between Fatah and Hamas with both sides exchanging a war of words after failing to reach an agreement on the elections. The local elections are not expected to substantially alter Fatah’s position in the West Bank, though the large number of party coalitions could introduce a number of small parties to the Palestinian political system.
Nepal holds elections amid disillusionment with government
For the first time in 20 years, on Sunday local elections will be held across Nepal. These will also be the first elections of any kind since the ratification of the revised Nepalese Constitution in 2015. Confidence of the citizenry in the effectiveness of its government was particularly weakened following the deadly 2015 earthquakes, though it is uncertain if this will trickle down to the local level. Although power is still largely concentrated in the central government in Kathmandu, the local government is frequently relied on to provide many basic services, and has some authority to collect taxes.
This election will represent an opportunity to build capacity for political parties in Nepal, currently concentrated among the Maoist Communists (Unified Communist Party), the Marxist-Leninist Communists (Communist Party of Nepal), and the center-left Nepali Congress. Currently, local government in Nepal struggles with corruption (which can hinder or delay the provision of services), which can depress turnout if Nepalese citizens come to believe that their vote will ultimately be ineffectual. However, as this will be the first time citizens will have their own elected governments since 2002, this may be sufficient to boost turnout and craft a more robust multiparty democracy.
Libya negotiations to continue with al-Sisi as deal appears increasingly likely
This week, the UN-backed Fayez al-Sarraj (controlling a little less than 1/3 of the country) and parliamentary-led rival Khalifa Haftar will meet with Egyptian president Abdel Fatah al-Sisi to continue on reaching an agreement to form a stable, legitimate (in the eyes of all major parties) government for the whole of Libya following the removal of Muammar Gaddafi and the severe reduction of oil production. The tentative agreement would create a three-person presidential council, led by al-Sarrah, Haftar, and the head of the armed forces. There are also indications that elections are expected as a result of this deal, though actual timing is uncertain with some suspecting elections in 6 months and others indicating 2018 to be more likely.
A final deal would be broadly beneficial for multiple concerned parties: for Europe, the porousness of borders and security in the country has led to a surge in refugees and human trafficking victims going to Europe; in North and West Africa, the conflict has encouraged the proliferation and spread of terrorist groups and gun trafficking. However, a deal will have to include more than political reconciliation: the identification of terrorist groups will be fundamentally important, as will securing borders and the controlling the flow of refugees. Additionally, the cessation of hostilities between the al-Sarraj and Haftar forces will be necessary, though it could be difficult for all groups to agree to such an arrangement. Cracking down on human trafficking will also be an important priority for the EU and UN.
The Week Ahead provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, The Week Ahead presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
This edition of The Week Ahead was written by GRI Analyst Brian Daigle.
