Weekly Briefing: August 1, 2016
August 1:
Malaysia’s PM receives new, sweeping security powers amid 1MDB scandal
Venezuela’s Electoral Council decides whether to hold a presidential recall referendum
August 2:
Japanese Cabinet votes on latest round of stimulus worth $265bn
August 3:
Japanese Cabinet reshuffle expected
Foreign ministers of five Central Asian countries meet with US delegation in Washington
South Africa holds local elections
August 4:
Bank of England monetary policy review
Deadline for UN-backed Yemeni peace talks
UK Labour Party leadership candidates Jeremy Corbyn and Owen Smith hold first debate
The DEF CON hacker and cyber security convention gets underway in Las Vegas
August 5:
Olympic Games in Rio de Janeiro get under way
August 6:
Nothing significant
August 7:
Thailand holds national referendum on giving military more power in upper house
JAPANESE STIMULUS AND CABINET RESHUFFLE
Last Wednesday, Japanese Prime Minister Shinzo Abe unveiled a $265 billion stimulus package in the latest attempt to breathe life into an economy suffering from stagnant growth and low inflation. The Bank of Japan followed this announcement by announcing it would modestly increase the purchase of exchange-traded funds but keep rates on hold.
This Tuesday, August 2, Japan’s cabinet will vote on – and likely approve – Abe’s stimulus package. Specific details of the spending plan have been scarce, and it is unclear how much of the $265 billion will consist of new spending.
Some analysts have expressed concern about the size of the stimulus plan – nearly six percent of the value of Japan’s economy – which is likely to be partially financed by a bond issue. This may worsen the country’s financial outlook in the long term. Compounding these issues and underlying the Japan’s poor economic performance is the country’s unfavourable demographic outlook: with an ageing population, low birth and immigration rates, there are muted prospects for natural growth in government revenues.
The day after the vote, Prime Minister Abe is expected to reshuffle his cabinet, primarily to replace those members who lost their seats in the July 10 upper house elections. Mr Abe has indicated the reshuffle would be “greater than midscale” and would seek to give a boost to Abenomics with a “strong new line-up”.
YEMEN PEACE TALKS
Negotiations over the conflict in Yemen almost collapsed last week when the Hadi government delegation announced they would pull out in reaction to the signing of a power-sharing deal between Houthi rebels and former President Ali Abdullah Saleh. At the twelfth hour, UN envoy Ould Cheikh Ahmed was able to negotiate a one-week extension to the talks and proposed a “framework for a solution to the crisis”.
Reports indicate the framework proposes the withdrawal of rebels from the capital Sanaa, which they occupied in 2014, the handover of weapons and return of strong state institutions.
The UN-backed peace talks, which began in April, have produced little in the way of tangible outcomes so far. The one significant development was the announcement of a ceasefire deal, but this has repeatedly been violated by both sides.
Due to months of intractable talks, it looks unlikely that a major breakthrough will be made in the coming days. However, if diplomats can convince the warring factions to remain at the negotiation table indefinitely over the next week, the chances of reaching an accommodation will increase.
BANK OF ENGLAND MONETARY POLICY REVIEW
On Thursday, August 4, the Bank of England will release a forward-looking assessment of the UK’s economic growth and inflation prospects and review the country’s interest rate.
After shocking markets by leaving interest rates on hold last month, the central bank is generally expected to cut the key rate on Thursday in an attempt to mitigate any economic downturn caused by June’s Brexit vote. If it does cut the rate from its current 0.5 percent peg, it will be the first loosening of monetary policy since 2009 and signal a new record low.
The central bank has indicated it may also consider taking more aggressive action and restart its bond repurchase program, which has been on hold since 2012. However, economists polled remain divided as to whether to whether the Bank will announce the resumption of its quantitative easing program this week.
RIO OLYMPICS BEGIN
On Friday, the 2016 Summer Olympics will be officially opened in Rio de Janeiro, with initial sporting events to begin next week. The lead up to the Olympics in Brazil has been plagued by political turmoil, security concerns, economic decline and issues relating to poorly constructed venues.
A recent spate of terrorist attacks in the Middle East, Europe, and the US have brought to light security concerns surrounding the world’s largest sporting event. In the past two weeks, Brazilian authorities have arrested 12 individuals who reportedly had pledged allegiance to ISIS and were plotting attacks during the Games.
Last week’s announcement that Artel, the contractor hired to provide security services for Olympic events, would not be able to fulfil its obligations has hardly inspired confidence in security preparations. However, Brazilian authorities assure that, with the deployment of more than 80,000 security personnel, spectators and athletes will be kept safe.
For Brazil, concerns about the Olympics are just one of many major issues plaguing the country. The economy in June entered into its fifth consecutive quarter of negative growth with a contraction of 5.4 percent in GDP since the Q1 of 2015. A political crisis caused by rolling corruption scandals has also enveloped to country’s political elite and forced the suspension of President Dilma Rousseff in May pending a politically-directed investigation.
THAI REFERENDUM
Thais will head to the polls in a referendum on Sunday, August 7, that could see the country adopt a new constitution.
The referendum will ask voters to ratify the new document that has been drafted by a military-appointed committee. The new constitution proposes a fully appointed 250-member upper house, which includes seats reserved for senior military officers. This chamber selects judges for the country’s constitutional court.
In the lead-up to the referendum, the junta has imposed a ban on campaigning, with critics accusing the government of specifically targeting the ‘no’ campaign.
Regardless of the outcome of Sunday’s vote, the current military government, which seized power in a bloodless coup in May 2014, has promised a general election will be held in mid-2017.
