Terror, corruption and power struggles drive political risk in 2016
In its report, the political risk consulting firm concluded that there is likely to be little respite from the political instability, civil unrest, economic volatility, security crises and geopolitical rivalries that defined the last 12 months.
Unsurprisingly, given recent attacks by Islamic State in Europe, Maplecroft says that the global terrorism threat is on the rise. The company recorded an estimated 7,750 conventional terrorist acts in 2015, and does not expect the threat to diminish in 2016.
Despite efforts by world powers to defeat the group, Islamic State is expected to remain resilient in Syria and Iraq. In fact, as the international coalition doubles its efforts to eradicate Islamic State, the group is expected to build on its terrorist campaign well beyond its heartland in Syria and Iraq.
“Armed groups which have pledged allegiance to the Islamic State in such countries as Egypt, Libya and Nigeria will figure prominently in 2016, exacerbating existent security concerns in these countries. As made abundantly clear during the November 2015 Paris attacks, western intelligence agencies will continue to struggle to manage the risk posed by returning western members of the Islamic State and lone wolf attackers at home,” Maplecroft said in the report.
It also predicted challenging times for Europe, as migrants fleeing wars in Syria and Iraq fuel support for populist parties. The migration problem is adding to growing public disillusionment with the EU, sparked by the uneven pace of economic growth in the eurozone.
“This could make government policy and legislation less predictable and less conducive to business,” Maplecroft said.
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In particular, doubt remains over whether the UK has a future in the EU, and whether Greece will stay in the euro. “A negative vote in a UK referendum on the issue would cause months of severe uncertainty for business within the United Kingdom and mainland Europe,” Maplecroft said.
Elsewhere in the world, Maplecroft predicted that extreme weather and low commodity prices are likely to aggravate political risk in Africa, while corruption is set to increase civil unrest in Latin America.
According to Verisk Maplecroft, job losses in Africa’s resource-rich countries are expected to provoke industrial action, while low commodity prices will hit government spending and rising living costs across the region. The risk of civil unrest will be compounded by a strong El Niño event, which may increase the cost of food due to lower rainfall.
Countries to watch include Central African Republic, Sudan, Kenya, Ethiopia, DR Congo, South Africa and Nigeria, it said.
The end of the commodity boom may also heighten risk in Latin America, particularly Brazil, Argentina and Venezuela. Argentina and Venezuela, which both saw newly elected governments in 2015, will experience a rise in political instability as they make the painful adjustments necessary to get back on a more sustainable growth track, Maplecroft said.
In Brazil, corruption and economic recession—including the ongoing impeachment process against President Dilma Rousseff—are having a destabilising effect.
The mass anti-government protests witnessed in 2015 are set to continue and could spike in the run up to the summer Olympic Games in Rio de Janeiro, Maplecroft predicted.
On the global stage, geopolitical tensions are set to continue. Tensions between Saudi Arabia and Iran have worsened in recent weeks as they struggle for influence and power in the Middle East, while Russia remains a source of friction. Despite Russia’s engagement with western powers in the fight against Islamic State, sanctions against the country are unlikely to be dropped in 2016, according to Maplecroft.
