EM Election Update

EM Election Update

There is a busy election calendar across emerging markets this year, with potential consequences for the direction of prevailing economic, social and trade policies (and, by extension, conditions for businesses). Here are some of the near-term political events we are thinking about...

In India, Prime Minister (PM) Narendra Modi’s Bharatiya Janata Party lost two recent local elections in Uttar Pradesh, an outcome which has made him very focused on winning the next state ballots. Faced with an opposition that appears to have learned the lessons of the 2014 elections, Modi is likely to further ratchet up the government’s Hindu credentials, at the expense of the relatively moderate political discourse we’ve seen to date. From an investment perspective, this could mean some delay to the country’s large-scale reforms, possibly until after the 2019 general elections.

In Hungary, the incumbent Fidesz party is expected to win again on 8 April, but at the time of writing the party looks as though it will struggle to achieve the two-thirds majority it is shooting for. This is in part due to the so-called Elios scandal, referring to the name of a company closely linked to PM Viktor Orban’s son-in-law. For investors, a modest win by Fidesz is a good outcome, as it points to continuity of existing policy, although it means continued friction with the European Union over its policy on accepting refugees. 

The incumbent coalition in Malaysia is widely anticipated to win elections which must be held before the end of August, but to fall short of a two-thirds majority. The mood in Malaysia is darkening over prime minister Najib Razak who remains tainted by controversy over missing money from state development fund 1MDB. Constituency limits are in some cases being redrawn and, at a time when polls show voters care more than before about religion in the country’s government, the PM has dialled up his Islamic credentials. Without an absolute majority, no constitutional reforms are possible, but economic reforms can be passed via a simple majority. Like all PMs in his position, Razak has to rely on economic growth to appease the electorate, which should provide some comfort for investors.