U.S. President Joe Biden held a three-hour discussion with Chinese President Xi Jinping. A busy week of global diplomacy has begun in the Asia Pacific region. Russia’s grain deal with Ukraine is set to expire. Protest marches continue in Mexico. Elections will be held in Malaysia.
Meanwhile, Sri Lanka’s president presents his first budget, presidential polls will be held in Kazakhstan, budget negotiations continue in Brazil, and a presidential scandal may hog the headlines in South Africa.
Chart of the Week
Chancellor Jeremy Hunt is on Thursday expected to announce UK tax rises and public spending cuts amid a bleak economic outlook. Voters, however, including those closer to the Conservatives, are unlikely to approve of the government’s strategy. One in three Conservative voters now believe that taxes – as well as spending on public services – are already too high, while only a quarter of the Tory electorate believes that both taxes and spending are too low in the UK. Against the backdrop of the cost-of-living crisis, voters across the board are likely to demand more government support, especially given already-squeezed public services. However, Hunt’s strategy of emphasizing economic competence and announcing a new energy support package – most likely targeted at pensioners and benefit claimants – could give the government some leeway in the short-term.
What to Watch
A busy week of international diplomacy in the region began with the ASEAN-centered East Asia Summit in Cambodian capital Phnom Penh from 12 to 13 November. Indonesia will chair the G20 summit in Bali from 15 to 16 November, while Thailand will host the APEC summit from 18-19 November. There will be many top-level meetings on the fringes of the three events, most notably a three-hour discussion between Joe Biden and China’s Xi Jinping that took place on 14 November, the first in-person encounter they've had since the former became US president.
The agreement brokered by Turkey and the United Nations last July, ensuring safe shipments of grain and foodstuffs from Ukrainian ports is set to expire on 19 November. To extend the initiative, Moscow is requesting the removal of restrictions on Russia’s exports of food and fertilizers. This includes a demand to reconnect the state-owned Russian Agricultural Bank to the SWIFT system. As the negotiations are continuing, Moscow is getting ready to increase the exports of grains in 2023 given record harvests in Russia.
The marches in defense of the National Electoral Institute (INE) that took place yesterday, 13 November, will continue to reverberate politically this week. Organizers claim that close to a million people marched in dozens of cities across the country. While the government has questioned the level of attendance, these were the biggest demonstrations since President Andres Manuel Lopez Obrador (AMLO) came to power in 2018. A high turnout should make wavering members of the Institutional Revolutionary Party (PRI), whose votes the government needs to pass the initiative, think twice before backing the controversial reforms. For now at least, PRI leaders deny that any negotiation is underway. Beyond the immediate electoral question, the marches may offer hope that the bruised opposition alliance could be resuscitated or regain some impetus over the coming months.
Elections will be held on Saturday, 19 November, with the current ruling coalition led by the National Front (BN) expected to remain in power. However, there are enough unknowns – including the weather, cost of living issues, how the significantly higher number of 18–40-year-old voters might affect the outcome and the importance of corruption in voters’ choices – that a clear takeaway on the implications for government stability and economic policy will only become evident once the final vote is tallied. To be closely watched is the performance of the United Malays National Organization (UMNO), which could have longer-term consequences on governance and race relations.
On the Horizon
Financial regulators have reportedly instructed banks to increase financing to the housing sector, where a sharp slowdown in construction and sales is exertingsevere downward pressureon the economy. The joint notice from the People's Bank of China and the China Banking and Insurance Regulatory Commission on 11 November reportedly urged financial institutions to extend repayment terms on loans to housing developers and to provide new loans to support construction of rental housing and for mergers and acquisitions among developers.
A first summit meeting since 2019 looks likely this week, withFumio Kishida and Xi Jinping set to hold talks mid-week in Bali or subsequently in Thailand. It would be an opportunity to improve relations that have been strained recently by tensions over Taiwan as well as the Senkaku/Diaoyu islands territorial dispute. Kishida will be hoping for some diplomatic wins on the international stage to boost his down-trending opinion poll numbers at home.
President Ranil Wickremesinghe will present his first budget today, 14 November. Wickremesinghe took charge of the country in July, after former president Gotabaya Rajapaksa left the country following mass protests. Sri Lanka is still struggling with a severe financial crisis. Colombo owes more than USD 50bn to foreign lenders and defaulted for the first time in history in May. Monthly inflation is over 50%, and shortages of food, fuel and medicines continue. The IMF and World Bank have agreed to extend conditional loans to the country. To comply with IMF loan requirements, Wickremesinghe’s budget is likely to introduce debt restructuring measures as well as tax and interest rate hikes, adding to public discontent.
Incumbent Kassym-Jomart Tokayev is set to be re-elected in the snap presidential election on 20 November. Tokayev does not face any meaningful competition, as key opposition parties and rivals remain sidelined from the vote. The incumbent will likely use the electoral victory to reassert his political leadership following violent protests in January, trying to break out of the shadow of former president Nursultan Nazarbayev. According to the recently amended constitution, Tokayev will be able to serve one seven-year term (until 2029).
Asanticipated, Natasa Pirc Musar (independent) was elected as the country’s president in the 13 November second-round runoff. With nearly all votes counted, Pirc Musar has received 53.9% of the votes, leaving her rival from the right-wing Slovenian Democratic Party (SDS) Anze Logar with 46.1%. While the president in the Slovenian political system is largely ceremonial, Pirc Musar's victory signifies continued voter support for moderate center-left politicians in the country, including Robert Golob’s coalition government.
The week will see a continued negotiation of the 2023 Budget following a speech by president-elect Lula that conditioned fiscal responsibility to the addressing of social demands. The speech on Friday, 11 November, had the effect of delaying the approval of the draft law which included a permanent waiver of BRL 175bn (USD 33bn) for additional spending on a cash transfer to the most vulnerable, including an additional per child amount (a new Bolsa Família), and an annual minimum wage increase based on average GDP growth in previous five years. Big Center parties want to limit the waiver to the increase in the cash transfer value (no additional) and the minimum wage and make it valid for 2023 only (not permanent), which would bring it down to BRL 58.4bn (USD 11bn). To appease markets, Lula may anticipate his choice of a finance minister. An environmental minister may be the first to be announced during the COP27 UN Climate Change Conference which Lula is attending this week on invitation by Egyptian president Abdel Fattah al-Sisi.
MIDDLE EAST AND AFRICA
President Cyril Ramaphosa’s Phala Phala scandal may hog the headlines this week. While Ramaphosa is attending the G20 meetings in Bali, at home political pressure is rising weeks ahead of the 16-20 December ANC elective conference. This week, an independent panel is due to submit a report to parliament on whether an impeachment vote against Ramaphosa is necessary. At a weekend ANC National Executive Committee (NEC) meeting, rivals including Nkosazana Dlamini-Zuma urged him to step aside. Ramaphosa could be forced to step aside if formal charges were laid, though various investigations seem unlikely to deliver findings before the conference.