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A Look Forward to 2023: Giving It a Wide Berth

In the emerging markets debt space, the political process can turn the tide of policy and outcomes in a country. As we flip the calendar to 2023, there are several elections and potential policymaker changes on the horizon that could make a splash. As such, we monitor developments on elections closely and find that the following may carry the most weight in the coming months as they will dictate the direction of macroeconomic policy and changes to the quality of governance in the countries we look at.

Navigating troubled waters in Nigeria

In February, Nigeria will hold its presidential election to replace Muhammadu Buhari, of the All Progressive Congress (APC) party, who will have reached his term limit after eight years in power. Ruling party candidate Bola Tinubu indicated he would not push a religious- or ethnic-based agenda but still trailed Labour Party candidate Peter Obi by double digits in polls as of late December. However, polls also show that roughly half of respondents were undecided or unwilling to share their candidate of choice. While all contenders for the presidency offer a potential break with the static macro policy of the Buhari administration, Obi has captured the imagination of Nigerians who are particularly worried about corruption, which is rife in the country. As well-known political figures, the other two candidates are less able to claim they are outsiders, although we do believe that the ruling party candidate Tinubu likely possesses an advantage going into the vote. That said, all three candidates have campaigned on the need to tackle the country’s two main policy headaches—unaffordable fuel subsidies and an unsustainable exchange rate regime—which should bode well for the economic policy trajectory, should the candidate of choice follow through on this campaign promise.

In addition, Obi recently outlined a plan to extend the runway for debt payments and to “borrow transparently for investment” with “no more borrowing for consumption.” At present, roughly 80% of Nigeria’s income is required for debt repayments, and we view Obi’s campaign platform to get a better handle on the country’s debt positively.

Turning of the tides in Turkey?

Turkey’s general election will take place in the second quarter of 2023, as President Recep Tayyip Erdogan of the Justice and Development Party (aka AK Party) seeks reelection for a third five-year term. While Erdogan’s popularity has suffered during the country’s bout with high inflation (that surpassed 80% in October), the opposition has so far been unable to put forth a joint candidate. Whether Erdogan returns or we get a new President, Turkey would benefit immensely from improvements across a range of areas, from the business environment to monetary policy independence and civil rights protections.

Blood runs thicker than water in Thailand

Following a coup in 2014, the main opposition party in Thailand seeks to regain control of the prime minister post with the help of a familiar surname in Paetongtarn Shinawatra, the daughter and niece of former Thai rulers Thaksin Shinawatra and Yingluck Shinawatra. She has emerged as the Pheu Thai party candidate of choice, and is taking like a duck to water, outpacing incumbent Prayuth Chan-ocha. Prayuth took control of power in 2014, when he helped lead a coup to overthrow Yingluck, though Prayuth argues his tenure as prime minster did not begin until 2019, causing uproar in the country over the potential abuse of term limitations. Prayuth’s tenure as leader of Thailand can be characterized as one featuring little true democracy and a weakening economy. Thailand’s working class looks for representation at the top, as post-COVID tourism recovery continues to struggle and inflation remains persistently high. Should a free and fair election occur, we may see another Shinawatra dynasty that could usher in a series of populist policies as Paetongtarn has campaigned on doubling the minimum wage, increasing subsidies and expanding Thailand’s medical welfare scheme amongst other things, all of which would be negative for the fiscal consolidation outlook.

Other fish in the sea

Also of note are the upcoming monetary policymaker leadership changes at the National Bank of Georgia, the Bank of Japan and the National Bank of Kenya, which could pave the way for adjustments in approaches for these central banks. In addition, the Chinese National People’s Congress Annual Session will take place in March, where officials announced in October of 2022 will officially take power. Later in the year, we will be watching the Polish parliamentary elections closely as they pertain to the country’s quality of policy and as its government navigates its relationship with the European Union. While these are the known happenings we intend to monitor in 2023, we also acknowledge that these are just a drop in the ocean of potential developments that could unfold throughout the year. We remain vigilant and have all hands on deck to identify investment opportunities that are unearthed from these events in 2023.