By Eric Vandenbroeck and co-workers 6 January 2020

Our assessments of what will be leading trends in 2020 include among others the US-China relations, Hong Kong, North Korea, Taiwan, Iran, Saudi Arabia, Turkey, Algeria, United Kingdom, Germany, European Union,  Italy,  Argentina,  Venezuela,  Russia and China, Ukraine and Russia, Russian Foreign Policy, Afghanistan, Kashmir, Indian Foreign Policy,  South Africa, Ethiopia, The Sahel, Guinea, Sudan, starting with:

Asia-Pacific

Hong Kong's political crisis will persist as the city's "new normal," even as the protests ebb and flow — or cease — for a sustained period. Neither political concessions, such as the resignation of Chief Executive Carrie Lam nor escalated responses by local security forces will contain the protest movement’s more radical elements, entailing a prolonged political impasse and continued standoffs on the street. Unless the demonstrations escalate into a citywide uprising, Beijing will refrain from deploying troops to intervene. That move, of course, would hurt Hong Kong's financial market and provoke possible U.S. economic sanctions; instead, it will likely assist Hong Kong's police in more discreet ways.

Sustained business disruptions, vandalism and the withdrawal of more foreign business and capital from Hong Kong will send the city into an extended recession in 2020 and beyond, raising the risk of financial volatility. Beijing will steadily increase its investments in Hong Kong's economy and financial system to mitigate this risk. It also will expand financial liberalization in mainland cities like Shenzhen and Shanghai, as well as Macau, while solidifying financial cooperation with Singapore for the Belt and Road and other regional initiatives.

 

Above Hong Kongs economic figures with a map casting its role in China

 

North Korea

The United States and North Korea will likely still be engaged in outreach by the end of 2020, albeit perhaps only after a rupture in talks that prompts North Korea to ratchet up tensions with missile tests. Any agreement the two countries reach to maintain or restart talks will not lead North Korea to substantially roll back its nuclear program; instead, Pyongyang will receive some sanctions relief in exchange for minor, reversible moves on its weapons or nuclear program. A North Korean exit from the talks would aim to increase pressure on Washington to return to the table with a more conciliatory position by raising the political costs for the United States. Indeed, the White House will be susceptible to such pressure if Trump's political fortunes are troubled. Pyongyang could resume intercontinental ballistic missile tests, particularly under the guise of satellite launches, to underscore to Washington the costs of not striking a deal. However, North Korea will carefully manage any confrontation given that its overarching goal is regime survival.

Because the U.S. campaign of maximum pressure is hurting the North Korean economy, Pyongyang will require Chinese and Russian support to weather or undermine the measures at the United Nations, meaning it will decide carefully whether to resume nuclear tests. To undermine U.S. moves to coordinate any military response among its allies, North Korea will threaten Japan and South Korea by building up conventional weapons stocks, freezing dialogue, eschewing relations and conducting missile tests to show the United States the costs of its refusal to heed Pyongyang's demands.

 

Taiwan

Tensions across the Taiwan Strait will continue in 2020 and increase if the ruling Democratic Progressive Party wins — as polls suggest — another term later this month. China will escalate economic and military coercion against Taiwan, raising the possibility of short, managed conflicts in the Taiwan Strait. An extended tenure for President Tsai Ing-wen will expand the scope of Taiwan's economic and military engagement with the United States, possibly including negotiations on an investment pact, elevated status in some international organizations and cooperation on defense and cyber matters. The United States, meanwhile, will increase its engagement with Taiwan, alongside Australia, Japan and New Zealand, in tiny Pacific countries to counter Beijing's efforts to poach Taipei's diplomatic allies. Should the more Beijing-friendly Kuomintang Party score an electoral upset in January, Taiwan will reduce the scope and level of its military cooperation with Washington and its regional allies. A Kuomintang victory will not, however, significantly alter Taiwan’s military relations with Washington.

 

Key Dates to Watch

11 Jan. 11: Taiwan holds a presidential election.

April 15: South Korea holds legislative elections. July 24-Aug.

9: Tokyo hosts the Summer Olympics. September: Hong Kong stages legislative polls. TBD: Myanmar holds general elections.

 

The Middle East and North Africa

Iran

Iran will its aggressive strategy as it waits to see if the 2020 U.S. presidential election yields an administration more amenable to talks than the current White House. Iran can wait because it has the wherewithal to hold out despite its worsening economy. The poor economy will incite more feuding among domestic political factions, but these various groups will stand together in support of the country's assertive foreign policies throughout the year.

Relations between the United States and Iran have steadily deteriorated over the past several years following the U.S. withdrawal from the Joint Comprehensive Plan of Action nuclear deal in May 2018 and its subsequent maximum sanctions pressure campaign against Iran. The threat for further escalation increased significantly following last week's targeted killing of Gen. Qassem Soleimani, the head of the IRGC's Quds Force, in Baghdad. Since then, Iran has repeatedly threatened to retaliate against American forces in the Middle East but did not specify when or how the retaliation would take place.

Ratching up the tension is when Iran launched a barrage of ballistic missiles against multiple U.S. targets in Iraq, including military facilities in Irbil in northern Iraq and Al-Asad Air Base in western Iraq, ABC News reported Jan. 7. The Islamic Revolutionary Guard Corps (IRGC) claimed credit for launching the missiles in Iranian state media, and said that any retaliation from the United States would be met with a "bigger and more comprehensive response."

Ballistic missile attacks from inside Iran against multiple U.S. facilities mark a significant escalation by Iran against U.S. forces in the Middle East. U.S. President Donald Trump has explicitly warned that any Iranian attack on American forces would result in severe retaliation, and if this concerted Iranian attack results in U.S. casualties, then that will only further increase the likelihood of a significant U.S. counterstrike. Therefore, the potential is quite high that we could be entering into an escalatory spiral toward a significant conflict, particularly if the next strikes from either side extend to beyond the Iraqi and Syrian theaters. The potential for this is now quite high given that the Iranian attack originated from within its borders. A U.S. military retaliation to the latest Iranian attack will likely seek to strike at the very bases from which the Iranian missiles were fired, at least in part. A strike within Iran's borders will likely drive further Iranian retaliatory attacks, potentially including on U.S. bases located in the Gulf Arab countries and other sites.

 

Saudi Arabia

 Low oil prices will drag down Saudi Arabia's economic growth in 2020, undercutting its overall economic reform effort. But even in the face of this budgetary challenge, Riyadh will maintain its social-spending programs, defense spending and expensive state-led investment in major projects as it seeks to maintain social stability and propel economic growth. Doing so will require it to run a budget deficit in excess of 5 percent of its gross domestic product that it will fund through international debt and its sovereign wealth reserves. Depressed oil prices and fears of clashes with Iran, among other conflicts, will dampen foreign investor interest despite Saudi Aramco's much-touted initial public offering. Instead, the Saudi state and domestic investors will fuel much of the country's growth and investment in 2020. To protect its relationships with investors and allies, Saudi Arabia will maintain its risk-averse foreign policy in 2020.

 

Saudi Arabia struggling to meet goals

Riyadh's domestic economic restructuring plans will move slowly in 2020 also for political reasons. The government will avoid any dramatic restructuring of the economy that could cost the public's loyalty, meaning it will continue to offer many Saudis public-sector jobs and maintain its cradle-to-grave welfare system. As a result, Riyadh will struggle to shift sizable numbers of Saudis into the private sector. Alongside this process, the Saudi government will lean on an increasingly potent nationalism that will help police Saudi social circles as reforms continue to liberalize the kingdom's culture.

 

Turkey

Turkey will pursue an independent foreign policy in 2020, following policies that will occasionally alienate its Western allies and provoke sanctions from them, as the ruling Justice and Development Party (AKP) exploits Turkish nationalism to offset domestic political challenges. As a result of this stance, Turkey will build new trade and defense links with Russia to help reduce its dependence on the West and bolster its separate geopolitical strategy. Nevertheless, Russia is not in a position to offer Turkey enough advantages to counterbalance all of Ankara's long-standing NATO ties.

In response, the United States and Europe will attempt to influence Turkish policy through diplomacy and sanctions to force Ankara to shift its regional course and downgrade its relations with Russia. This effort will produce a backlash within Turkey, strengthening Turkish nationalism and giving the AKP government greater political room to pursue its own independent policies, especially in conducting military operations against Kurdish militants in Syria and Iraq, investing in economic and security opportunities in Africa, expanding oil and gas exploration in the eastern Mediterranean, and engaging in soft power competition with the Arab Gulf states.

Turkey will calculate that its fragile economy can endure any sanctions blowback from these policies even though it will be vulnerable to external risks and fluctuations in 2020. To offset the impact of any sanctions on the domestic economy, Ankara will prioritize populist policies to maintain citizens' trust in the government, especially as the AKP will face new competition in the form of splinter parties.

 

Algeria

Algeria's ongoing protests will have a minimal effect on how the military-aligned political elite transitions to a new government after two decades of former President Abdel Aziz Bouteflika and a chaotic 2019. Despite pressure on the government to open the political process to newcomers, the military, the ruling National Liberation Front party and Algeria's other prominent political stakeholders will maintain their alliances as they carefully oversee the consolidation of a new government. And while it contributes to long-term structural economic instability, the government will succeed in maintaining most social-spending programs. This will minimize protesters' economic demands and reduce the strength of the ongoing protest movement.

Despite elite consensus on liberalizing the economy, the protest movement has slowed Algeria's efforts to open up to the world, meaning foreign investors will struggle to make inroads into the country in 2020. Moreover, if protesters refuse to accept the new government’s decisions in 2020 because of the controversial elections that helped bring it to power, the military will likely step in more forcefully, deepening political polarization and economic uncertainty that will discourage much-needed foreign investment.

European Union The European Union will seek to play a more active role in global affairs and better defend its interests. To this end, the European Commission will become more energetic in cracking down on monopolistic behavior in the European Union. The bloc's executive body will also push to reactivate trade talks around the world, increase pressure on non-EU countries to offer companies from the European Union the same treatment they offer to local companies and be ready to retaliate against trade pressure from the United States and elsewhere. The commission, however, will struggle to implement proposals that require significant changes in existing regulations, such as comprehensive immigration reform and the introduction of an EU-wide

 

Europe

United Kingdom

Because the British Conservative Party, which is determined to make Brexit happen, controls a majority of seats in the House of Commons, the British Parliament will approve a Brexit deal, and the United Kingdom will leave the European Union in early 2020. Under the terms of the exit agreement, the United Kingdom will then remain in the EU single market for the rest of the year, which means households and companies will not experience meaningful economic disruptions in 2020. The United Kingdom and the European Union are interested in preserving their close trade ties and will spend 2020 negotiating a free trade agreement. But the talks will be complex because Brussels will push to have British products follow the norms and regulations of the single market, an idea London will resist in hopes of developing its own regulations. Since they represent the core of its economy, the United Kingdom will push to include as many services as possible in the deal. Most notably, London will want to include its ultra-competitive financial services sector — but the European Union, which hopes to develop its own financial sector, will be reluctant to do agree.

Owing to the complexity of the negotiations, the European Union and the United Kingdom probably will not sign and ratify a comprehensive free trade agreement covering most goods and services by the end of the Brexit implementation period in December 2020. To avoid having to trade under World Trade Organization tariffs in 2021 (thus making trade more expensive for both), London and Brussels could agree on a limited deal that covers most goods but only a handful of services and postpones the agreements on other areas of the bilateral relationship. Should the negotiations on a limited trade deal fail, London and Brussels will likely agree to extend the implementation period into 2021, keeping the United Kingdom in the single market for longer than originally planned. Meanwhile, as EU-U.K. negotiations drag on, London will be discussing a trade deal with the United States. These negotiations also will be complex and probably will last well beyond 2020.

 

Germany

Germany will experience low economic growth in 2020 due to a combination of foreign and domestic factors, including global trade uncertainty and low levels of government spending. The members of Germany’s coalition government will be divided over how to react to this slow growth. The conservative Christian Democratic Union will resist any measures that could threaten the country's balanced budget policy, while the center-left Social Democratic Party will push for greater public spending. Germany's government will be fragile because of internal dissent, and the threat of early elections will persist.

The differences over fiscal policy will prevent the German government from implementing a large package of economic measures to boost domestic consumption and stimulate growth. Instead, the government will likely implement specific measures such as investment programs connected to environmental policies — but not to the point where they threaten Germany’s zero-deficit policy. Berlin's policy decisions will keep private consumption below its potential, the country will continue to have a large trade surplus and high savings rates, and public investment will be modest. Germany's low growth rates will probably weigh on countries in its industrial supply chain, most of which are in Central and Eastern Europe. It would take a long, deep recession or a significant change in the ideological composition of the German government — such as a general election followed by a left-wing government — for Germany to abandon its fiscal neutrality and embrace large stimulus measures, an eventuality Stratfor does not anticipate in 2020.

 

European Union

 The European Union will seek to play a more active role in global affairs and better defend its interests. To this end, the European Commission will become more energetic in cracking down on monopolistic behavior in the European Union. The bloc's executive body will also push to reactivate trade talks around the world, increase pressure on non-EU countries to offer companies from the European Union the same treatment they offer to local companies and be ready to retaliate against trade pressure from the United States and elsewhere. The commission, however, will struggle to implement proposals that require significant changes in existing regulations, such as comprehensive immigration reform and the introduction of an EU-wide digital tax or the creation of a common consolidated tax base.

A fragmented European Parliament and governments with conflicting national interests would have to agree on such changes, an unlikely development in 2020. France, Germany, and others will use Brexit as an opportunity to push for deeper EU cooperation on issues ranging from defense to finance, but conflicting views among member states will impede progress. Brussels will also keep accession talks with candidate countries alive in an effort to prevent non-EU players like Russia and China from becoming more influential in places such as the Western Balkans. But the bloc will not accept any new members in the foreseeable future, which will diminish EU credibility to some extent.

Meanwhile, the European Central Bank will apply expansionary monetary policies to try to boost inflation and economic activity in the bloc. Some member states, particularly in Northern Europe, may protest these policies but they ultimately will tolerate them because of low growth and modest inflation in the euro area, and because action by the ECB will offset to some degree the reluctance of these governments to introduce more expansive fiscal policies. The bank will also more vocally defend higher public spending in the eurozone, but reform of EU debt and deficit targets will not happen in 2020. Instead of changing these targets, the new commission, in office since Dec.1, will become more flexible when it comes to enforcement, allowing governments to spend more in the face of an economic slowdown in Europe.

 

Italy

Italy's coalition government, composed of parties with different ideologies and policy goals, will constantly be at risk of collapse. As a result, Rome will have only limited room to introduce reforms to address Italy's structural problems, which include low growth, massive debt levels, and a relatively high deficit. Rome will also lobby for reforms to EU debt and deficit rules but will meet with only modest success. At the same time, the Euroskeptic opposition in Italy will remain popular, forcing households, companies, and investors to factor in the possibility of an Italian exit from the eurozone in the event the populist right was to take over the government. While Italy's membership in the 19-country eurozone will not be at risk in 2020, most of its structural economic issues will remain unresolved, meaning economic and political risk in the country will persist.

                                                                                                              

 

America's

Argentina

Argentina will default on much of its debt in 2020. The country is unlikely to reach a deal with the International Monetary Fund or private creditors. Argentina's weak economy means that President Alberto Fernandez cannot simultaneously satisfy voters (by increasing spending) and the IMF (by maintaining a budget surplus to ensure its debt is sustainable). When forced to choose between these options, he will opt for the first course. While the government will use public spending to try to keep social unrest within tolerable margins, the ground will remain fertile for sporadic protests.

In distancing himself from his predecessor's policies and solidifying his populist credentials — thus avoiding the bulk of the popular backlash that has plagued other Latin American countries — Fernandez will increase public spending so much that fiscal deficits could become unfinanceable without a default. Meanwhile, capital flight and the dollarization of a growing informal economy will threaten Argentina's formal economy, especially if the government converts dollars into pesos to pay its bills. Given the integration among South America's economies, an Argentine default could ripple through the region, possibly raising borrowing costs and exacerbating budget problems elsewhere. As Argentina's trade policies become more protectionist under Fernandez, frictions within the Common Market of the South (Mercosur) will likely escalate, putting the already-troubled customs union and trade bloc at risk of collapse. See this recent assessment for more on Argentina's long-running economic problems.

 

Venezuela

Though ultimately unsustainable, Venezuela's status quo will not crack in 2020. Venezuelan President Nicolas Maduro will fend off opposition leaders, including National Assembly President Juan Guaido, in 2020, largely maintaining his grip on the country. The United States will expand its sanctions against the country, adding wide-ranging secondary sanctions to limit China and Russia's ability to prop up Maduro. Washington will also seek to divide the regime by offering amnesty to Venezuelan military and civilian officials close to Maduro's inner circle in exchange for their support for a transitional government in cooperation with Guaido and others. Still, Maduro's government will maintain its near-monopoly on the country's economic resources as Venezuelan oil exports stabilize, while the military will remain united enough to keep Maduro in power. As the government digs in and U.S. sanctions intensify, Venezuela's oil industry will suffer, resulting in further drops in oil exports. Another year of economic crisis will also cause more Venezuelans to flee to neighbors like Brazil and Colombia, fueling a migrant crisis.

 

Mexico and the United States

Mexico and the United States will continue to cooperate on curbing the northward flow of Central American migrants in 2020. The decline or stabilization of monthly flows across the southern U.S. border will satisfy U.S. President Donald Trump ahead of the November U.S. presidential election. Though Trump will make his immigration policy a focal point of his reelection campaign, he will likely refrain from overtly threatening Mexico with tariffs or actually introducing such measures. Mexican President Andres Manuel Lopez Obrador, meanwhile, will continue to work closely with the United States on security measures, in large part to avoid U.S. pressure on other matters. As Lopez Obrador enjoys broad support — though somewhat less than when first elected — he will have the political cover he needs to continue cooperating with U.S. security initiatives in 2020.

To boost his populist credentials, Lopez Obrador will push measures to fight poverty and corruption, albeit to varying degrees of success. He will also face criticism over rampant cartel violence and the damage it's doing to Mexico's economy, but given U.S. demands on immigration, he will have to keep troops deployed to deter immigration from Central America rather than shifting them to the cartel fight. Should already-extreme levels of cartel violence intensify during 2020, Lopez Obrador will find it more difficult to pursue economic nationalism and fulfill his promises to reduce poverty and inequality.

 

Key Dates To Watch

26 Jan.: Peru holds legislative elections.

3 Feb.: The U.S. 2020 presidential primary season kicks off with the Iowa caucuses.

1 March: Uruguay's new president assumes office.

3 March: 14 U.S. states, including California and Texas, simultaneously hold presidential primaries on "Super Tuesday," the most at once in the election season. April: Chile may hold a referendum on whether to replace its constitution.

14 April: A deadline expires for Bolivia to hold a new presidential election. October: Candidate registration opens for Ecuador's February 2021 presidential and National Assembly elections, with campaigning set to begin in January 2021.

19 Oct.: Chile conducts municipal and regional elections, as well as perhaps a vote for a constituent convention to overhaul the country's constitution.

3 Nov.: The United States holds a presidential election, alongside polls for 35 senators and all 435 members of the House of Representatives.

 

Eurasia

Russia and China

In 2020, China and Russia will continue to expand their cooperation in a variety of fields. Thanks primarily to trade compatibilities — Russia boasts products and expertise that China desires, such as energy and agricultural goods — and a common adversary in the United States, the two countries will deepen their collaboration as part of the longer-term evolution in their relationship, which will extend beyond 2020. Through trade, the two will reduce their dependence on Western markets. At the same time, Moscow and Beijing will continue to expand its military cooperation through the sale of weapons systems and the organization of joint military exercises.

Some issues, however, could disrupt the Sino-Russian alliance, especially in Central Asia or a post-U.S. Afghanistan, where they have competing interests. Still, the two will strive to manage these potential causes of friction to maintain their strategic alignment and reduce their vulnerabilities to powers like the United States. Russia and China will also differ over their respective relationships toward Europe. While Russia may seek to improve — or at least normalize — its relations with some Western European states beyond 2020, these countries increasingly view China as a threat to their economies and intellectual property rights. Countries in Eastern Europe, by contrast, are largely antagonistic toward Russia out of fear of Moscow's machinations, while they perceive China as a potential economic partner.

 

Ukraine and Russia

Ukraine and Russia will fail to achieve meaningful progress in negotiations over the status of Donbas over the next year. The countries' continued inability to progress toward implementing the Minsk agreement, which outlines the steps to end the Ukraine conflict, and the Steinmeier Formula, which defines the political status of contested territories, will result in continued Western pressure against Russia. Mutual frustration at the lack of results will likely deter further diplomatic efforts in both countries and roll back recent progress in stabilizing parts of the front line in eastern Ukraine. In the end, the United States will maintain its sanctions against Russia, although any additional sanctions are likely to be merely symbolic or only focused on specific actors in Russia.

 

Russian Foreign Policy

Policy Russia's economic stagnation and domestic political problems will continue to drive Moscow toward strengthening diplomatic and trade support to alleviate its own challenges, while also inserting itself in areas where it can directly contest or disrupt Western interests. As part of this strategy, Russia will focus on cultivating greater military and economic ties with foreign governments in the Sahel, Central Asia and elsewhere. Russia, for instance, can make inroads in the Sahel, where Western nations have failed to halt spreading militancy, and Central Asia, where the threat of jihadist militancy persists amid attempts by the United States to extract itself from the Afghan conflict next door.

Russia will also seek to exploit deteriorating stability in Latin America, where Argentina's mining sector provides opportunities for Russian companies, or in Middle Eastern countries like Saudi Arabia, where Russia could make further arms sales and investments to deepen its role. To achieve its goals, however, Moscow will have to depend principally on low-cost or self-sustained efforts such as information campaigns or private military activity financed by local Russian economic interests, as well as direct revenue-generating activities such as arms sales or oil, gas, and nuclear power projects.

 

Key Dates to Watch

9 Feb.: Azerbaijan holds parliamentary elections.

30 Aug.: Belarus holds a presidential election. By October: Georgia holds parliamentary elections.

4 Oct.: Kyrgyzstan holds legislative elections. TBD: Tajikistan holds parliamentary and presidential elections. TBD: Moldova holds presidential elections.

 

South Asia

Afghanistan

The United States will proceed with a partial withdrawal from Afghanistan and pursue a peace deal with the Taliban with the support of regional powers, all of which wish to stabilize the country and limit the threat of transnational extremism. The challenges of winning a military victory in Afghanistan have driven the United States to launch negotiations with the Taliban so as to pave the way for a political settlement between the insurgents and the Afghan government. In the first phase of the process, the United States will push the Taliban to reduce violence and make a pledge to oppose al Qaeda and the Islamic State in exchange for a partial drawdown of U.S. troops. The Taliban, in turn, will portray any U.S. withdrawal as a victory against foreign forces. Meanwhile, despite their varying degrees of tension with the United States, Russia, China and Iran will support the process to encourage regional stability in support of their self-interest, as will Pakistan, the Taliban's primary external sponsor.

A U.S.-Taliban deal won't end the war in Afghanistan; it will only usher in a more complex phase of the peace process involving dialogue between the Taliban and the Afghan government. Even if those talks begin, uncertainty lingering from the Afghan presidential election in September will create complications for a comprehensive peace deal. Although preliminary results released in late December indicated that incumbent Ashraf Ghani won re-election, opponent Abdullah Abdullah has vowed to contest the count. Afghanistan's next president will seek to forge a unified front in talks with the Taliban to both hammers out an agreement that features a comprehensive cease-fire and debates the shape of a postconflict government as well as a new constitution.

 

Kashmir

In 2020, Indian Prime Minister Narendra Modi will tighten the central government's control over Kashmir by enforcing a counterinsurgency campaign to keep violence manageable while encouraging the migration of non-Kashmiri Hindus into the region and drawing investment from outside the state. As Pakistan continues to voice its opposition to Modi's decision to strip Indian-controlled Kashmir of its sovereignty, the greatest possible trigger for a bilateral conflict will be a large-scale militant attack linked to a Pakistan-based group (the many local grievances that could trigger an attack notwithstanding), prompting Indian retaliation against Islamabad. But because of the presence of nuclear weapons and the prospect of international intervention, both countries will be careful to calibrate their responses so as to avoid a larger conflict. For a map of the border, disputes see:

As a result, the prospects for normalization between the subcontinent's rivals remain dim, which will dash Islamabad's efforts for talks in the face of New Delhi's accusations of cross-border militancy. For Modi, revoking Kashmir's autonomy strengthens India's territorial unity at a time when Pakistan stands to gain from a peace deal in Afghanistan. Politically, the biggest impact of Modi's decision will occur in Jammu and Kashmir itself, where the government will face protests, insurgency, and inflamed separatism. In the end, the greatest challenge to Modi's decision will come from the Indian Supreme Court's review of the decision's constitutionality.

 

India's Economy

Boosting growth in India's $2.6 trillion economies will be New Delhi's primary domestic challenge in 2020. The Bharatiya Janata Party-led (BJP) government will rely on a mix of monetary and fiscal stimulus to boost demand and revive investment, though low-interest rates could raise inflation. A cooling economy means less tax revenue, increasing the chances that the Indian government will miss its deficit target by the end of the fiscal year in March 2020 — something that would hurt the fiscal consolidation drive it has been pursuing since before the global financial crisis.

The greatest political challenge facing the BJP over the economy will come in state elections in Delhi and Bihar in which the opposition Indian National Congress hopes to exploit economic pain. A win in state elections would help the BJP increase its seat share in Parliament's upper house — most of whose members are elected by state legislatures — as its current minority limits its ability to pass land and labor reform. Cooling growth also explains why the BJP is more likely to emphasize Hindu nationalism by constructing a temple to the god Ram on the ruins of a mosque in the town of Ayodhya and conducting a nationwide census that detractors say could target minorities. Ultimately, such moves could inflame social tensions and incite protests. Read on to see what India is doing to halt its economic downturn.

 

Indian Foreign Policy

India's fears of Chinese strategic encirclement will accelerate its investment and defense overtures to neighboring countries in South Asia, marking a central plank of Modi's foreign policy in 2020. However, Beijing's funding advantages over New Delhi and its willingness to renegotiate debt with Sri Lanka and the Maldives explain why its political and economic relationships with these countries — as well as with Nepal and Bangladesh — will only grow, particularly as the countries wish to diversify their foreign relations beyond India, the regional hegemon.

Beyond South Asia, China's maritime expansion into the Indian Ocean will further strengthen India's defense partnerships with the United States and Japan as part of Washington's Indo-Pacific strategy to create an informal bloc of nations to counterbalance Beijing. Even so, strategic competition between India and China will not preclude tactical cooperation as the neighbors aim to maintain calm on their disputed Himalayan border, especially at a time when Beijing is more focused on its sharpening rivalry with the United States. Ultimately, India's demand for strategic autonomy and its historical relationship with Russia — its chief arms supplier — explain why the U.S.-India relationship will progress more slowly than Washington would like, particularly as India proceeds with its purchase of the Russian-made S-400 air defense system.

 

Key Calendar Dates

February: A new deadline for the Regional Comprehensive Economic Partnership (RCEP) trade deal expires. February: India's Delhi holds Legislative Assembly elections. April: The Taliban are expected to launch their annual spring offensive. October: India's Bihar state holds Legislative Assembly elections. TBD: Afghan parties form a new government following elections in September 2019. TBD: Assembly elections occur in Jammu and Kashmir. TBD: India and China meet for border talks

 

Sub-Saharan Africa

South Africa

In 2020, crippling political gridlock and crumbling infrastructure will stymie much-needed solutions to turn around South Africa's long-term economic trajectory. Infighting within the ruling African National Congress party will force President Cyril Ramaphosa to walk a tight line between pro-business and populist policies to maintain his slight hold over the party. In this, Ramaphosa will try to carefully manage forward momentum on the controversial policy of land expropriation without compensation at the risk of spooking foreign investment and increasing South Africa's currency volatility.

More broadly, intraparty divisions will also impede the government's ability to tackle the economy's continued low growth with a comprehensive economic plan. Enduring economic malaise will keep unemployment and crime rates sky-high, compelling high-net-worth and highly skilled workers to emigrate for better opportunities. The subsequent "brain drain" will continue to exacerbate the government's tax revenue shortfalls, leading to more unsustainable debt levels in the years ahead.

Ongoing efforts to bolster South Africa's failing infrastructure, meanwhile, will see fits and starts, as the ineffective state electricity giant Eskom continues to thwart economic and business activity with paralyzing blackouts. As the country's anti-corruption probes trudge on, some key political figures may be arrested within the year, destabilizing powerful corrupt factions in the government and state-owned enterprises. But the overall battle to halt corruption will be met with muted success because of the deeply entrenched and pervasive nature of the problem.

 

Ethiopia

Despite spiraling interethnic violence, Ethiopia will likely move forward to give its next government enhanced legitimacy in elections slated for May. Prime Minister Abiy Ahmed's relatively successful push to unite the country's ruling coalition into a single party will better his odds of political survival in the face of shaky regional support, while also increasing the chances for a more coherent next government following the election.

However, it will be critical to monitor whether the ruling party of the Tigray region eventually signs on to Abiy's single-party proposal, as failure to secure the party's accord will increase Tigray's bid for independence. Hostile relations with the country's northernmost region also risk further eroding the federal government's control over much of its border with Eritrea. The Ethiopian government, in turn, may become more reliant than ever on the northeast Danakil Desert region to access Eritrea's southern Assab port, thus limiting its supply chain options.

Regardless of who wins the May vote, Ethiopia's next government will eventually continue Abiy's overall economic liberalization and reform push in order to jump-start the private sector and create more jobs for its desperate constituents. Partial or full privatization efforts in key sectors can thus be expected to advance in the second half of the year, including ending state-owned EthioTelecom's long monopoly by issuing telecommunications licenses to international companies.

 

The Sahel

In 2020, militant groups will continue expanding their presence throughout the Sahel and into coastal West Africa by taking advantage of the region's weak governance, interethnic violence, and the spoils of illicit mining and drug trafficking. The increasing means and recruitment efforts of these terrorist groups — and they're growing desire to assert their might and relevance — will place key states such as Ivory Coast, Ghana, and Senegal at risk of sporadic attacks, hurting tourism and investment in these well-performing West African economies.

Despite being the main guarantor of security in the Sahel, Europe — and in particular, France — will remain hesitant to devote more resources or troops to the counterterrorism struggle. This vacuum will give Russia more leverage to increase its presence in the region by offering arms and training support to frustrated Sahel governments. For more on the Sahel's worsening security situation, read this Stratfor assessment on the matter.

 

Guinea

Guinea's octogenarian president, Alpha Conde, will forge ahead with a constitutional amendment that would allow him to run for a controversial third term in 2020. To pass the amendment, Conde's ruling party will first need to increase its legislative majority in February elections, followed by a successful countrywide referendum. The 81-year-old president will likely be able to lean on powerful outside friends in Russia and Turkey to boost his efforts by leveraging Moscow and Ankara's desires to shore up their interests in the resource-rich country. (Guinea is one of the world's top exporters of bauxite, among other materials.)

But Conde's attempt to remove his term limits has also mobilized huge street demonstrations, with political opposition and civil society groups ratcheting up pressure on the government to scrap the process ahead of the country's slated October presidential election. As Guinea inches closer toward the polls, escalating anti-government efforts may start targeting the country's critically important and highly lucrative mining sector.

 

Sudan

2020 will see the further implementation of Sudan's political transition following the removal of President Omar al Bashir in April. The country's current transitional period is scheduled to end with elections in 2022. To remain on this course, the new government will first seek the removal of Sudan's designation by the United States as a state sponsor of terrorism. The lifting of sanctions related to the designation would significantly help restabilize the country's macroeconomic situation by opening the floodgates to foreign investment and aid. Until that happens, however, the government and multinationals operating in the country will struggle to access the capital and equipment needed to pursue large projects in Sudan's infrastructure, mining, energy and agricultural sectors. The ongoing lack of new financial support will also continue to stem the government's efforts to restructure its massive debt burden.

On the political front, Sudan's transitional process will include the further development of internal civilian leadership through the establishment of a legislative council and appointment of new state governors. Such efforts may initially spark rifts between Sudan's military stakeholders and civilian politicians. But overall, the military will ultimately support the transitional process and the greater benefits it can bring to Sudan, while still preserving its role as a key power broker in the country.

 

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