Countries and regions above the trend line in the chart above are proving more effective in vaccination rollout — the “jabs” markets. The main reasons include the development of proprietary vaccines by locally-based companies, the ability to rapidly obtain more doses, greater distribution efficiency, and government policies to encourage mass inoculation. The economic outlooks for these countries will likely be reinforced in the next months as vaccine distribution can be also regarded as a proxy for policy effectiveness on the recovery side. Countries below the trend line typically include the emerging market universe, which have seen limited access to costly vaccines, a relatively higher pressure on institutions and social systems. In these countries, the “jab-nots”, economic growth and overall resilience are still driven by long-term factors such as demographics, commodity-related revenues and, possibly, from some base effect of 2020 (for example, Argentina, Mexico, and India saw worse-than-expected recessions last year). Although there currently seems to be a correlation between positive economic outlook and successful vaccine roll-out programs, it is a trend to be closely watched, as political risk events that may occur in both “jabs” and “jab-nots” would have an impact on economic performance.
For countries that are lagging, notably many in Africa, social and political unrest remains a probable outcome. Pre-existing social tensions, exacerbated by the pandemic, have increased difficulties in governance, and have constrained the fiscal room to manoeuvre for African countries to appease their disenchanted publics. As the gap widens, factors such as food security, water access, and a declining contribution from the informal economy, will only increase the level of economic and political risks.
Meanwhile, commodity prices have been driven up, principally by infrastructure spending and national recovery stimulus plans. In recent times, governments have been consolidating their hold on strategic resources as a means to raise revenue and redirect their spending to newly urgent priorities such as damaged health and labour systems. For example, in Chile, the Congress is examining several opposition-led bills potentially affecting the mining sector, where some key agreements due to expire in 2023 will likely be reviewed by the next government. The debate on royalties has fuelled political risk in the world's top mining producing region, with higher taxes for miners proposed in both Chile and Peru. Latin American countries’ economic profiles are also exposed to environmental risks combined with a relatively low level of development focused on reducing potential impact of natural disasters related to climate change.
Across all countries, the immediate consequences of the pandemic are still unfolding and may have long-term implications. In the Political Risk Map 2021: Mid-Year Update, we’ll explore further these foregoing themes — global vaccination inequity; increasing social unrest and political tension; Africa’s growing economic exposure; and the challenges that the commodities sector is currently facing globally.