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Americas

The third quarter will see a continuation of the global two-speed recovery according to countries' access to vaccines and the success of their vaccination campaigns. 

Quarterly

The Port of Oakland on May 7, 2021, in Oakland, California. The global economy will continue its recovery and most developed countries will experience strong economic growth, but progress will be uneven in other parts of the world.

Global Trends

<p>The global economy will continue its recovery and most developed countries will experience strong economic growth, but progress will be uneven in other parts of the world depending on the success of vaccination campaigns. Downside risks for the global economy include rising inflation, a lack of fiscal space in many countries for further economic stimulus and high debt levels. The path of t<a href="/article/what-happens-when-covid-19-becomes-endemic">he global economy will remain linked to the epidemiology of the pandemic</a>, with further gains tied to vaccination progress and policy support actions in recovering from losses. Aggregate global gross domestic product in the third quarter is likely to remain below what it would have been without the virus. Despite robust growth in the third quarter, longer term global growth may slow down and resume its pre-pandemic pattern given low levels of investment; a lack of productivity increases; and adverse demographics in the United States, Europe, Japan, and China.</p><p>The United States and China will drive global growth while Europe will emerge from a double-dip recession. Growth will be slower in countries like Japan, Korea and Australia due to slower vaccine rollouts. About half of global GDP gains will be from China and the United States, with fiscal and monetary stimulus buoying the U.S. recovery, but at <a href="/article/us-inflation-lights-fire-under-fed-s-monetary-policy">risk of inflation</a>. China&#39;s recovery will remain uneven and dependent on exports and government-directed infrastructure investment, while new virus outbreaks could still <a href="/article/china-s-slowing-and-still-unbalanced-recovery">slow GDP expansion</a>. A return to economic rebalancing and deleveraging to reduce financial instability risks are additional challenges to improving consumer demand and increasing <a href="/article/china-undercuts-its-own-efforts-make-renminbi-international-currency">employment growth in China</a>. Delayed vaccine rollouts in developed countries outside of North America and Europe will require more prolonged restrictions on movement and social interactions that will <a href="/article/covid-19-surge-sets-back-india-s-economy">impede economic progress</a>.</p>

<p>The economic recovery will be fragile in emerging markets and developing countries with lagging vaccination campaigns and tighter external financing. Potentially tighter external financing conditions would be an additional drag on the global recovery, especially for those countries with a heavy reliance on <a href="/article/despite-recent-growth-turkey-s-economy-remains-fragile">foreign financing</a>. Global liquidity depends on the U.S. Federal Reserve and European Central Bank continuing easy money policies in the third quarter and well into 2022, which depends, in turn, on their tolerance for increased inflation. There is a low probability of a systemic, sovereign debt crisis in emerging markets and developing countries, but a record number of sovereign defaults in 2020-2021 shows that vulnerabilities of individual countries are exacerbated and financial markets will pay attention to progress in fiscal consolidation and structural reforms to stabilize debt levels or at least <a href="/article/imf-global-growth-picture-improves-though-challenges-remain">slow the rate of increase</a>.</p>

Uneven Progress Toward an Economic Recovery

<p>High commodity prices will add to inflation fears as the global economic recovery continues to outpace supply growth of many commodities, including copper and oil. A weak dollar and widespread economic stimulus will continue to underpin strong commodity prices as demand picks up faster than supply levels can adjust. Calls that this will trigger a multiyear period of high prices among most major commodities are probably premature, but copper and other materials directly associated with the energy transition are likely to see the strongest and more lasting price fundamentals.</p>

<p>OPEC+ will continue to slowly <a href="/article/opec-production-cuts-meet-another-covid-19-reality-check">add oil back to the market</a>, but does not want to jeopardize the price recovery into the $60s and $70s by adding too much supply at once. Although an Iran-U.S. deal is possible this quarter, any ramp-up of Iranian oil exports is unlikely to majorly impact supply until after the third quarter. High commodity prices will increase the financial cushions of major commodity exporters including Saudi Arabia, Angola, Algeria, Nigeria, Australia, Chile and South Africa, but will pale in comparison to the economic activity lost in previous quarters due to COVID-19. Moreover, possible new lockdowns in some middle-income and developing countries, such as South Africa, could dampen the economic windfall of higher commodity prices.</p>

Rising Commodity Prices Contribute to Inflation Fears

<p>The United States will prioritize <a href="/article/despite-new-deals-eu-us-tech-tensions-remain">rehabilitating trans-Atlantic relations</a> to make progress on issues including global taxation, trade disputes and climate change. The United States will push for international tax reform and will largely concede that most large U.S.-based technology companies will need to face higher taxes globally, though negotiations could extend into the fourth quarter. The United States and European Union will <a href="/article/biden-visits-eu-and-us-move-closer-trade-differences-china-remain">continue to negotiate over tariff disputes</a>, including U.S. tariffs on steel imports. A deal is likely by the end of the year, but the talks will be more complex than those over subsidies for airline manufacturers that resulted in a deal in June.</p>

<p>The United States will seek to accommodate Germany&#39;s backing of the Nord Stream 2 pipeline by trying to find common ground on how to maintain gas transit through Ukraine once the pipeline is operational. Finally, Europe and the United States will continue to push for increased climate change and energy transition commitments from the private sector and outline new national policies ahead of the 2021 U.N. Climate Change Conference (COP21) in November.</p>

The U.S. Prioritizes Improved Trans-Atlantic Ties ...

<p>The United States and Iran will take steps toward returning to the Joint Comprehensive Plan of Action now that Iran&#39;s <a href="/article/previewing-iran-s-presidential-election">presidential elections are wrapped up</a>. It&#39;s unclear whether any agreement will be reached before the end of outgoing President Hassan Rouhani&#39;s term on Aug. 3, but his successor, <a href="/article/iran-s-conservatives-clear-path-presidency">Ebrahim Raisi</a>, will continue negotiations with the West if a deal is not reached by then. Until a deal is reached, Iran will continue aggressively expanding its nuclear activities in hopes of gaining more leverage with the United States in talks. The strategy is high risk, as Iran has already made it more difficult for the International Atomic Energy Agency to monitor Iran&#39;s nuclear program. If negotiations fall apart, the lack of sufficient monitoring will fuel calls by Iran hawks in the United States and Israel for a broader policy response, which in the case of Israel could be an expansion of its covert war against Iran&#39;s nuclear and missile programs.</p>

… and the Iran Nuclear Deal

Global Trends 

Asia-Pacific

<h3>Escalating China-U.S. Tensions Block Progress on Trade</h3><p>U.S.-China tensions will escalate and block significant progress on a trade deal as U.S. calls for human rights and COVID-19 investigations and <a href="/article/protesting-xinjiang-cotton-western-companies-incite-china-s-ire">China&#39;s domestic nationalism</a> reduce the room for near-term cooperation. Unofficial U.S.-China trade talks will continue and early official trade talks are possible, but tensions will slow their pace and hinder any significant developments in 2021, unless China&#39;s economy sees a significant dip in growth.&nbsp;</p><p>In Washington, congressional bills and the Biden administration&#39;s reviews &mdash; including of supply chain vulnerabilities and U.S. interactions with China&#39;s military &mdash; will prompt competitive industrial policies that upset Beijing and encourage further economic decoupling. In Beijing, nationalism surrounding the 100th anniversary of the Communist Party of China on July 1 will see China unwilling to make any policy decisions that might be perceived as a win for the United States or a compromise by China, reducing room for cooperation on even the least contentious issues, <a href="/article/big-oil-gets-wake-call-climate-change">such as climate change</a>. Globally, U.S.-led calls for investigations into Xinjiang human rights abuses and the origins of COVID-19 as well as <a href="/article/biden-visits-eu-and-us-move-closer-trade-differences-china-remain">efforts to recruit nations</a>&nbsp;to boycott the Beijing Olympics will heighten U.S.-China tensions.</p><h3>China&#39;s Recovery Decelerates</h3><p>China&#39;s economic recovery will decelerate as Beijing emphasizes sustainable growth and external factors challenge traditional growth drivers. High global commodity prices, moderating global demand for Chinese goods and the minor COVID-19 outbreak in the manufacturing hub of Guangdong will limit <a href="/article/china-s-slowing-and-still-unbalanced-recovery">China&#39;s export-led growth</a>. More pressure on <a href="/article/china-unweaving-tangled-web-local-debt">local governments via budget scrutiny</a> and oversight of land sales may hurt short-term growth prospects for the provinces, at least until local officials find alternative vehicles for taking on debt. Broader regulatory scrutiny, especially against tech firms (including foreign companies such as Tesla), will dampen investor confidence in China, while other <a href="/article/what-happens-when-covid-19-becomes-endemic">developed economies&#39; recoveries</a>&nbsp;will encourage diversification of the global investment that flooded into China in 2020. Later in the year, and in the lead-up to the February 2022 Olympics, Beijing may ease its emphasis on healthy growth and instead focus on economic stability as downward pressures threaten its GDP growth goals.</p><h3>Political Uncertainty in Japan</h3><p>Japan will enter a period of political uncertainty as rival Liberal Democratic Party (LDP) figures compete for the post of prime minister, which could result in a return to weak, short-tenured prime ministers at the mercy of party factions. With the COVID-19 pandemic calming down, Tokyo will hold a municipal election in July, when the governing LDP will face a challenge from the conservative Tokyoites First party. Later that month, the city will host the <a href="/article/japan-delay-tokyo-summer-olympics-economic-damage">delayed Summer Olympics</a>. Both events will test the popularity of the current LDP leadership. The quarter will come to a head in September, when the LDP will hold internal leadership elections amid internal party challenges for Prime Minister Yoshihide Suga, who <a href="/article/japan-post-abe-era-emerges-sooner-expected">replaced political powerhouse Shinzo Abe</a> in late 2020. October will see the deadline for lower house elections, which will present a test of whether the LDP will lose ground (but certainly not its majority) to the opposition. A failure for the ruling party to ensure continuity in leadership will <a href="/article/japans-relationship-china-evokes-cold-war-memories">put Japan at a disadvantage</a> as it works under U.S. auspices to counterbalance <a href="/article/more-assertive-china-drives-japan-respond-kind">China&#39;s regional rise</a>.&nbsp;<br />&nbsp;</p>

<h3>COVID-19 Slows Down Large Regional Economies</h3><p>A slow rollout of COVID-19 vaccines and sustained upticks in cases in large regional economies such as Vietnam, Malaysia, Thailand and Taiwan as well as in emerging economies like Cambodia and the Philippines will slow down the region&#39;s economic recovery. Taiwan&#39;s wave of COVID-19 and difficulty securing adequate vaccine supplies will lead to continued disruptions in semiconductor output and <a href="/article/evolving-taiwan-china-relationship-part-1-economy">business continuity</a>,&nbsp;exacerbating global supply shortages. Malaysia&#39;s high COVID-19 case numbers will make it difficult for the government to lift its lengthy restrictions by midquarter as planned. Any easing of the state of emergency will trigger a political crisis as the <a href="/article/malaysias-prime-minister-resigns-amid-political-turmoil-economy-coalition-southeast-asia">fragile Malaysian government</a>&nbsp;faces a vote of no-confidence in parliament and potential elections. Vietnam will struggle to contain its new, more severe wave of COVID-19, although <a href="/article/broadening-anti-graft-campaign-complicates-vietnam-s-economic-future">robust government capacity</a>&nbsp;to monitor and respond to the pandemic will better position it to ensure economic output compared to its neighbors. Cambodia will deal with massive case numbers, too, and disruptions to factory output worsened by its government&#39;s limited capacity to deal with the pandemic. Thailand will also face a continued wave of COVID-19 that could lower support for the military-aligned government and monarchy, emboldening post-pandemic <a href="/article/thai-government-will-ensure-protests-only-get-so-far">anti-government protests.</a>&nbsp;<br />&nbsp;</p>

<h3>Beijing&#39;s Tightening Grip Could Provoke a Modest Backlash in Hong Kong</h3><p>Hong Kong&#39;s September election committee vote will mark the return to tightly controlled politics in the city, raising the prospect of modest backlash by the pro-democracy side and the consolidation of power by pro-Beijing forces, increasing long-term risks for foreign businesses operating in the city. The electoral period will bring greater public focus on democracy issues as select groups of Hong Kongers choose representatives for the committee that under new <a href="/article/mainland-finalizes-and-implements-hong-kong-electoral-reforms">China-imposed election reforms</a>&nbsp;will choose the majority of Hong Kong&#39;s Legislative Council and will vet candidates in December legislative elections. While The pro-democracy camp&#39;s scope of action in the electoral realm will be limited and <a href="/article/chinas-security-law-ushers-new-and-uncertain-era-hong-kong">the National Security Law</a>&nbsp;will <a href="/article/hong-kong-amid-security-crackdowns-national-day-draws-lackluster-protests">deter large turnouts</a>, the waning of the COVID-19 pandemic might result in greater willingness to turn out for acts of defiance against authorities on unpredictable occasions. Students, youths and other particularly disaffected elements of the movement may also prove more willing to resort to violent tactics or even bomb plots. The election committee vote will allow the mainland to extend its control over Hong Kong as it begins the process of installing lawmakers friendly to its interests under the new electoral system. This will raise long-term risks for foreign businesses operating in the city as Hong Kong potentially revisits economic and judicial policies, but will present opportunities for companies seeking to use Hong Kong as a gateway into the mainland market.&nbsp;<br />&nbsp;</p>

<h3>South Korea Reaches out to the North as U.S.-North Korea Dialogue Stagnates</h3><p>South Korea will engage in conversations and consider small-scale economic outreach to North Korea, while U.S.-North Korea dialogue will likely remain stagnant as Pyongyang focuses on its domestic challenges. South Korea will try to make progress in its outreach to North Korea as President Moon Jae-in prepares for the end of his single term and his party prepares for elections in mid-2022. Pyongyang may be more open to dialogue with South Korea given hopes of easing sanctions and the risk that South Korea could shift toward a conservative presidency in 2022, closing off Seoul&#39;s role in facilitating U.S.-North Korea dialogue. Inter-Korean outreach could take the form of talks between the two sides or attempts to engage in small economic cooperation projects in fields such as tourism, although North Korea&#39;s response will also include attempts to pressure Seoul through aggressive rhetoric or <a href="/article/acceleration-north-korea-s-missile-program">tactical weapons tests</a>. Throughout the quarter, however, North Korea will remain largely internally focused due to COVID-19 fears and its economic downturn, but the need for vaccines will open the door for vaccine diplomacy from China, and potentially the United States. China will increase its economic outreach to North Korea to ensure stability in the country and to shore up its influence with the regime. The United States will be slow to pursue outreach with Pyongyang in spite of its new flexible approach to North Korea. Even if meetings do take place, the Biden administration&#39;s other priorities, the difficulties of finding a compromise with North Korea and North Korea&#39;s internal focus will all limit progress.&nbsp;<br />&nbsp;</p>

Key Trends for the Quarter

<p><strong>July 1: </strong>The Communist Party of China marks its centenary.&nbsp;<br /><strong>July 4: </strong>Tokyo municipal elections.&nbsp;<br /><strong>July 23 - Aug. 8: </strong>The pandemic-delayed Tokyo Summer Olympics.&nbsp;<br /><strong>Aug. 7: </strong>The window opens for Australian elections, which can take place as late as May 21, 2022.<br /><strong>Aug. 24 - Sept. 5: </strong>The pandemic-delayed Tokyo Summer Paralympic.&nbsp;<br /><strong>September: </strong>The LDP holds internal leadership elections.&nbsp;<br /><strong>Sept. 19: </strong>Hong Kong will conduct Election Committee Subsector elections.<br />&nbsp;</p>

Key Dates to Watch

Europe

<h3>An Uneven Recovery in the European Union</h3><p>Economic activity will increase considerably across Europe as domestic lockdown measures are lifted and international travel restrictions are softened, though the recovery will be uneven and risks remain. Softer restrictions and the continuation of stimulus measures will result in strong consumption, trade and investment across the Continent. The summer season will bring some <a href="/article/europe-s-pandemic-rattled-tourism-sector-braces-another-tough-year">relief to tourism-dependent countries</a> in Southern Europe, even if the 2021 season will probably not reach pre-pandemic levels. Because of their more diversified economies, some Northern European countries will be on their way to return to pre-pandemic GDP levels by the end of 2021, while countries in the south <a href="/article/covid-19-s-uneven-impact-europe-portends-equally-uneven-recovery">will have to wait until 2022</a>. But risks remain as the emergence of new COVID-19 variants and the subsequent reintroduction of tighter social distancing measures could still derail &mdash; and exacerbate the unevenness of &mdash; the economic rebound in Europe.&nbsp;<br />&nbsp;</p>

<p>Faster economic growth and higher inflation will lead to a growing debate at the European Central Bank over whether to scale down or even suspend its bond-purchasing programs. The end of recession in the eurozone will lead some members of the ECB executive board &mdash; particularly those from Northern Europe &mdash; to demand a tighter monetary policy to prevent an escalation of inflation in the currency area and to increase the profitability of private banks, which are being negatively impacted by extremely low interest rates. While ECB authorities may suggest a change of monetary policy for later in the year or early 2022, the institution is unlikely to implement any meaningful changes in the third quarter, as the recovery remains incipient.&nbsp;</p><h3>Germany Focuses on Its Federal Election</h3><p>Germany will spend the quarter in electoral campaign mode, which means that Berlin will probably not introduce any meaningful policy changes and the EU policy-making process may also slow down. The September election will result in a fragmented Bundestag and prolonged negotiations to form a government, and the new administration may only take over late in the fourth quarter or in early 2022. German voters will choose between conservative parties that want to tighten fiscal policy in the short to medium term and left-leaning parties that want to preserve or even expand current levels of public spending. Environmental issues will also dominate the campaign, with left-leaning parties offering a faster and stricter timeline for the <a href="/article/what-government-greens-would-mean-germany">reduction of greenhouse gas emissions</a> than their conservative peers. With the exception of the far right and the far left (which are relatively isolated), none of the mainstream parties will question German membership in the European Union or NATO, though left-leaning parties will seek a reduction in military spending and faster federal integration in the European Union. With the bloc&#39;s major economy focusing on internal issues, the European Union is likely to delay the implementation of any major policy changes until after there is a new government in Berlin.&nbsp;<br />&nbsp;</p>

<h3>Unrest in Northern Ireland Over the EU-Withdrawal Agreement</h3><p>Political and security risks in Northern Ireland will increase during the summer, but widespread violence and the collapse of EU-U.K. negotiations are unlikely. The risk of clashes between Unionists and Republicans, new riots and attacks against police forces and customs officials in Northern Ireland will increase as Unionist forces hold their annual rallies during the summer. In addition, Unionist politicians will continue to denounce the <a href="/article/northern-ireland-again-finds-itself-center-brexit-disputes">Northern Ireland protocol</a> of the EU-U.K. Withdrawal Agreement, which could incite anger among Unionists and lead to sporadic flare-ups, even if widespread violence is improbable. London and Brussels will negotiate a softer implementation of the protocol, though they may not reach a deal during the quarter because of the complexity of the issues involved. While the dispute could escalate &mdash; the European Union could impose tariff hikes on British goods and the United Kingdom could delay the implementation of customs controls at the Irish Sea &mdash; negotiations will likely continue because both sides are interested in preserving their free trade agreement.&nbsp;<br />&nbsp;</p>

<p><strong>July 1: </strong>EU Digital COVID-19 Certificate goes into effect throughout the bloc.<br /><strong>July 1: </strong>Slovenia takes over the rotating presidency of the European Union.<br /><strong>July 11: </strong>Bulgaria holds parliamentary elections.<br /><strong>July 15: </strong>German Chancellor Angela Merkel set to meet U.S. President Joe Biden at the White House.<br /><strong>July/August: </strong>Protestant Unionist groups hold annual rallies in Northern Ireland.<br /><strong>Sept. 13: </strong>Norway holds parliamentary elections.<br /><strong>Sept. 26: </strong>Germany holds its federal election.<br />&nbsp;</p>

Iranian President-elect Ebrahim Raisi holds a press conference on June 21, 2021, in Tehran, Iran.

Middle East and North Africa

<h3>Sunni Economic Cooperation Grows, but Tensions Remain</h3><p>Sunni states will focus less on competing with one another and more on improving economic ties as they emerge from the COVID-19 pandemic, but tensions will remain. <a href="/article/making-sense-turkey-s-contradictory-behavior-part-1">Turkey will reach out to rivals</a> like the United Arab Emirates, Saudi Arabia and <a href="/article/egypt-and-turkey-aligned-out-step">Egypt</a>, trying to rebuild economic ties without making concessions on aggressive regional foreign policy that includes Libya, the <a href="/article/whats-driving-turkish-aggression-mediterranean-sea">Eastern Mediterranean</a>, the Horn of Africa and supporting the Muslim Brotherhood. Sunni states will be open to economic deals, but will not drop their opposition to Turkey&#39;s strategic goals in the region. Similarly, Gulf Cooperation Council countries that have dropped their <a href="/article/what-s-driving-saudi-arabia-ease-its-3-year-qatar-blockade">blockade of Qatar</a> will expand business ties with Doha, but will still vehemently oppose&nbsp;<a href="/article/what-does-end-qatar-blockade-mean-muslim-brotherhood">Qatari tolerance of the Muslim Brotherhood</a>. Meanwhile, all parties will experience pressure from the United States, which wants regional stability and is reviewing its relationships with friendly states in the region. This pressure will give the region&rsquo;s Sunni states good reason to avoid overt confrontations among themselves.</p><h3>Turkish Foreign Policy Rhetoric Softens, Economic Policies Remain Volatile</h3><p>The <a href="/article/despite-recent-growth-turkey-s-economy-remains-fragile">Turkish economy will remain volatile</a>, but foreign policy rhetoric is likely to be less aggressive. Though President Recep Tayyip Erdogan and his ruling Justice and Development Party (AKP) will be less antagonistic in a bid for <a href="/article/making-sense-turkey-s-contradictory-behavior-part-2">economic benefits</a>, Erdogan&#39;s continued embrace of <a href="/article/contextualizing-turkey-s-surprise-interest-rate-hike">unconventional monetary policy</a> throughout the quarter will undermine this effort. Clashes with his monetary policy team could ensue if inflationary pressure lessens and Erdogan pushes for lower interest rates before the market is ready. This could ensure the Turkish lira and economy remain volatile.</p>

<p>On the plus side for the economy, Turkish overtures to the European Union and regional powers like Egypt will help Turkey avoid <a href="/article/trump-s-exit-will-increase-turkeys-exposure-sanctions">U.S. and EU sanctions</a>, while leaving Turkey able to pursue its foreign policy goals, including consolidating gains in Syria and Libya, expanding operations against the Kurdistan Workers&#39;&nbsp;Party (PKK) in Iraq, and continuing maritime oil and gas exploration in the Mediterranean.</p><h3>A New Iranian President Focuses on Sanctions Relief</h3><p><a href="/article/previewing-iran-s-presidential-election">Iran&#39;s new president</a> will focus heavily on economic growth at home and relief from international sanctions. Incoming Iranian President Ebrahim Raisi, who takes office during the quarter, will focus on breaking with moderate policies embraced over the last two terms of outgoing President Hassan Rouhani. Raisi will put a heavy focus on domestic policy, such as managing the country&#39;s sanctions-burdened economy through implementing some populist economic measures at home and building out new regional trade ties to boost trade revenue for Tehran.</p>

<p>His <a href="/article/iran-s-conservatives-clear-path-presidency">conservative politics</a> will shape his approach to near- and long-term negotiations with the West over sanctions relief. This means while he will pursue a near-term deal over nuclear activity and sanctions relief, he will consider <a href="/article/biden-s-sluggish-start-talks-will-test-iran-s-patience">negotiations</a> over other aspects of Iran&#39;s behavior, including missiles and support for regional proxies, a nonstarter.</p><h3>Israel&#39;s New Government Struggles to Govern as the Risk of Unrest Persists</h3><p><a href="/article/israel-finally-has-new-government-now-what">Israel&#39;s fragile new unity government</a> will struggle to govern, and grassroots Jewish, Arab and Palestinian violence in the West Bank, Gaza, and throughout Israel could trigger sustained unrest and/or another round of conflict with Hamas. The ideologically diverse government of Prime Minister Naftali Bennett will disagree sharply on major Israeli policies like Israeli expansion of control over Jerusalem and the West Bank and its military strategy to deter Gazan militants, though there will be alignment over less controversial policies like the national budget, conscripting the ultra-Orthodox into the military and new anti-corruption measures.</p>

<p>Meanwhile, <a href="/article/gaza-tensions-unleash-israel-s-far-right">extremist Jews</a>, restive Israeli Arabs, and activist Palestinians will be poised to clash throughout the quarter over evictions in East Jerusalem, long-standing Israeli Arab poverty, Israeli settlement expansion, and far-right Jewish protests designed to influence Israel&#39;s identity and undermine the unity government. These clashes could escalate into major unrest that could spark another round of conflict in Gaza, especially if they occur around holy sites in Jerusalem.&nbsp;</p><h3>Saudi Arabia Cautiously Pursues a Rapprochement With Iran</h3><p>Saudi Arabia will cautiously pursue bilateral rapprochement with Iran as the United States and Iran grow closer to negotiating another <a href="/article/how-us-will-ease-its-arab-allies-fears-iran-talks">nuclear deal</a>. The slight easing of tensions between two of the region&#39;s biggest rivals will help promote greater regional stability. Iran and Saudi Arabia held bilateral <a href="/article/can-saudi-arabia-and-iran-ease-tensions">talks for the first time in years</a> during Q2, and Iran has consistently said that Tehran welcomes more talks. Although Saudi Arabia will remain more cautious than Iran about burying the hatchet, it will likely be willing to talk with Tehran given that its major security partner, the United States, seems likely to strike a deal with Iran on sanctions relief in the quarter. Given that Riyadh wants to continue <a href="/article/five-years-saudi-arabia-signaling-it-wants-out-yemen">reducing its involvement in Yemen</a>, it will have something to offer Iran in any bilateral talks given both countries&#39; invested interest in the theater.</p>

<p><strong>July 14: </strong>Central Bank of Turkey&#39;s Monetary Policy Committee rate decision.<br /><strong>Aug. 4:</strong> Iranian President Ebrahim Raisi is inaugurated.<br /><strong>Aug. 12: </strong>Central Bank of Turkey&#39;s Monetary Policy Committee rate decision.<br /><strong>Sept. 23: </strong>Central Bank of Turkeys Monetary Policy Committee rate decision.</p>

Eurasia

<h3>Russia-Belarus Integration Takes Shape</h3><p>Economic integration and political reforms will solidify Russia&rsquo;s influence over Belarus, but the resulting erosions of Belarusian sovereignty will not turn Russia and Belarus into a single state or result in de facto annexation. Details of what Russia will receive in exchange for its continued economic and political support for the Belarusian regime will emerge during the quarter. But Belarusian President Alexander Lukashenko will probably prevent the most problematic erosions of Belarusian sovereignty such as new Russian bases, permanent Russian troops, or a single currency. A first draft of amendments to the Belarusian constitution due in August will likely reduce Lukashenko&rsquo;s singular influence by increasing the role of parliament and establishing a clearer succession process. Moscow&rsquo;s main demand will also be the depersonalization of the Belarusian regime to make Lukashenko&rsquo;s departure &mdash; even if still distant &mdash; manageable in terms of preserving Russia&rsquo;s influence in the country. Russia will secure greater alignment with Belarus on energy resources, as well as taxation and customs systems, among 26 other integration &ldquo;roadmaps.&rdquo; But Minsk will resist Moscow&rsquo;s efforts to acquire Belarusian state enterprises, including the potash and oil refining spheres, which are now under EU sanctions. In all, the integration roadmaps will <a href="/article/belarus-president-lukashenko-seeks-russian-help-bolster-his-position">cement Russian influence</a> in the country through bureaucratic and economic alignment, allowing Russia to control Belarus through the low cost option of making Belarus economically dependent on Russia without a risky change of power or security intervention. Renewed <a href="/article/charting-path-protests-power-belarus">mass protests will not materialize</a>, as Belarusians opposed to Lukashenko will remain intimidated and divided on how to overcome the crisis.&nbsp;</p><h3>More Military Activity in Eastern Ukraine</h3><p>Russia and Belarus&rsquo; Zapad 2021 exercises in September will reignite tensions with NATO, and Russia will increase its military presence on the Ukrainian border. Russia will likely also attempt to use the exercise to permanently station additional troops in Belarus, but new permanent Russian forces in Belarus, if any, will be largely symbolic. The Zapad exercises will <a href="/article/eastern-ukraines-frozen-conflict-turning-hot">simulate an escalation with Ukraine</a>, though other military districts, including the Northern Fleet, will contribute forces or conduct their own drills around the same time.</p>

<p>Moscow will leave additional units and new infrastructure in Western Russia to make rapid deployments to the Ukrainian border area easier in the future. Ukrainian President Volodymyr Zelensky will warn of a buildup similar to that seen during preparatory exercises in April, which will force the United States and European countries to affirm their <a href="/article/ukraine-seeks-biden-s-help-should-temper-expectations">political support for Ukraine</a>. Despite domestic skepticism toward its tractability, Zelensky will not leave the Minsk Agreement, as Western backers like the United States, France and Germany will want to avoid provoking Russia. Zelensky will use the push against pro-Russian politicians and Ukraine&rsquo;s oligarchs to boost his popularity during the security scare of the Zapad exercises. But the parliament will probably slow down meaningful action due to Ukrainian oligarchs&rsquo; persistent influence, including within Zelensky&rsquo;s own party &mdash; a key sticking point in Ukraine&#39;s relations with the West. A weaker fight against corruption in Ukraine could jeopardize the country&rsquo;s <a href="/article/ukraine-tries-put-its-imf-program-back-track">next tranche of a crucial IMF loan</a>, which is expected as early as September.</p><h3>A Key Parliamentary Election in Russia</h3><p>The Russian government will not face any meaningful challenges in the September parliamentary election because of the <a href="/article/what-make-russias-ongoing-crackdown-dissent">crackdown on dissent</a> initiated last year, but condemnation from the West is probable. An uptick in Russia&rsquo;s brain drain is also possible. The composition of the Russian State Duma will not change in a meaningful way following the election. Jailed <a href="/article/ailing-health-navalny-and-his-political-movement-russia">opposition leader Alexei Navalny</a>&rsquo;s &ldquo;Smart Voting&rdquo; initiative, which seeks to consolidate the votes of those who oppose the ruling United Russia party, could achieve a few tactical victories in the upcoming election, but it will have no larger strategic effect. Russian authorities will prevent the proper function of &ldquo;Smart Voting&rdquo; prior to the election by blocking the service and imprisoning those associated with it. Even new pseudo-opposition parties are unlikely to make it into the parliament. But if they do, they will have little effect on the political situation in the country. The failure of new meaningful voices to reach the Duma will likely lead to a renewed wave of disenchantment among younger Russians and an uptick in the number of young people seeking to emigrate for political freedom and economic opportunity. The United States and European Union, meanwhile, will denounce the mass falsifications, rights violations and use of intimidation by authorities, which, along with other issues, will obstruct improvement in Moscow&rsquo;s relations with both Washington and Brussels. Small and disorganized protests in Russia may follow the parliamentary election, but the chilling effect of <a href="/article/russia-case-study-proliferation-repression-tactics">nearly a year of repression</a> means they will be relatively insignificant, as opposition supporters fear criminal prosecution.&nbsp;</p><h3>Vaccination Woes Threaten Russia&rsquo;s Economy</h3><p>Rising inflation and a low inoculation rate will limit Russia&rsquo;s economic recovery and force the government to mandate vaccines while considering additional stimulus measures. High oil prices will contribute to Russia&rsquo;s economic recovery, but inflation and overheating fears will limit growth. Slow vaccination rates and growing vaccination hesitancy will force the Kremlin to at least initially force unpopular decisions on <a href="/situation-report/russia-moscow-orders-mandatory-vaccinations-amid-covid-19-spike">mandatory vaccinations</a> and new lockdown measures onto bureaucrats, regional governors and businesses, whose claims of their economic necessity will not assuage frustrated Russians. Russian authorities will resort to increasingly desperate measures of both coercion and persuasion, such as raffles, to get people vaccinated. Russians&rsquo; own hesitance toward domestically developed vaccines will also somewhat weaken Moscow&rsquo;s ability to use its vaccines as a geopolitical tool abroad.</p>

<p>Populist economic stimulus prior to the September parliamentary election, such as pension indexation for working pensioners or maternal capital, cannot be ruled out, despite inflation fears. Pre-election social payments could even in some way be tied to COVID-19 vaccination status. Separately, while the Nord Stream 2 pipeline between Russia and Germany will move toward physical completion, gas won&rsquo;t flow this quarter as the fear of sanctions will prevent crucial insurers and certifiers from rejoining the project.&nbsp;</p><h3>Russia&rsquo;s Growing Arctic Presence Further Chills U.S. Ties</h3><p>U.S.-Russia dialogue is unlikely to make significant progress, while Moscow&rsquo;s growing presence in the Arctic region could be a factor in increasing tensions with the West. Russia&rsquo;s parliamentary elections and the situation in Ukraine will prevent an improvement in U.S.-Russia relations, while additional U.S. sanctions or a Russian cyberattack could further reduce the chances for renewed dialogue. While dialogue on the issues of arms control and cybersecurity agreed to at the June Geneva summit will get underway, concrete improvements in bilateral relations are unlikely in the third quarter. On the contrary, Russia will <a href="/article/increased-arctic-activity-sets-stage-us-russia-competition">continue its military buildup</a> in the Arctic region in the crucial late summer window prior to the Northern Fleet&rsquo;s exercises scheduled for the fall, possibly at the same time as the Zapad 2021 exercises. Russia will push for a resumption of meetings with military leaders from the United States and other Arctic countries in a bid to offset the rise in tensions resulting from the growing presence of Russian forces in the region.&nbsp;</p><h3>Simmering Security Risks in the Caucasus and Central Asia</h3><p>Border disputes will die down in the Caucasus and Central Asia, but the possibility of sudden volatility will persist. The cautious peace will hold in Nagorno-Karabakh, as Armenia and Azerbaijan &mdash; along with their respective Russian and Turkish backers &mdash; are incentivized to keep it, for now. The re-election of <a href="/situation-report/armenia-prime-minister-reelected-landslide-despite-nagorno-karabakh-loss">Armenian Prime Minister Nikol Pashinyan</a> in June will create the conditions for the current cease-fire agreement in Nagorno-Karabakh to hold, although unclear borders mean flare-ups cannot be ruled out. Meanwhile, Azerbaijan will ramp up its efforts to legitimize and secure its territorial gains in Nagorno-Karabakh by bringing Western investments to the region to solidify international recognition. Similarly, April&rsquo;s border <a href="/situation-report/tajikistan-kyrgyzstan-militaries-exchange-gunfire-border-water-dispute">conflict between Kyrgyzstan and Tajikistan</a> is unlikely to reignite, but regional borders leftover from the Soviet era that are riddled with exclaves mean that conflicts over access to isolated territories are always a possibility. In Georgia, the EU-brokered deal for the biggest opposition party to end its boycott of parliament will hold, reducing the risk of sudden political upheaval in the country.&nbsp;<br />&nbsp;</p>

<p><strong>July 23: </strong>Russian Central Bank meeting.&nbsp;<br /><strong>August: </strong>Belarus unveils final proposals for constitutional changes.&nbsp;<br /><strong>September: </strong>Possible start of Russia-Belarus integration processes.&nbsp;<br /><strong>Sept. 10-16: </strong>Zapad military exercises in Russia and Belarus. &nbsp;<br /><strong>Sept. 19: </strong>Russia holds parliamentary election.&nbsp;<br />&nbsp;</p>

<h3>Favorable Agricultural Prices Will Temporarily Stabilize the Argentine Economy</h3><p>A short-term increase in the price of agricultural exports will temporarily stabilize Argentina&#39;s economy in spite of complex IMF negotiations and increased government spending. Argentina&#39;s debt negotiations with the IMF will likely remain stalled until after a crucial legislative vote in October, indicating that long-term financial uncertainty will continue. A short-term increase in the price of the country&#39;s main exports (soy products and beef) along with access to IMF special drawing rights, however, will likely temporarily stabilize the country&#39;s economy. The government will likely use revenue from export tariffs and taxes to support a preelection welfare spending push such as programs to help households and companies deal with the pandemic, undermining any long-term financial stability gained by the increase in central bank coffers due to export prices.&nbsp;</p><h3>COVID and Slow Reforms Will Continue to Limit Brazil&rsquo;s Economic Recovery</h3><p>Brazil&#39;s economic recovery will be moderate, stymied by a slow process of fiscal adjustment and the potential for a third wave of COVID-19 infections. Brazil&#39;s modest economic recovery will likely continue to be driven by the services industry, high prices of agricultural exports and fixed business investments. High public sector spending on populist policies &mdash; such an extension of the country&#39;s cash-transfer program &mdash; and the difficult prospects for fiscal reforms stuck in Brazil&#39;s Senate will likely <a href="/article/brazil-barreling-toward-all-out-economic-crisis">continue to dampen investor confidence</a>. As the COVID-19 pandemic continues, public spending will likely remain high due to expenses such as personal protective equipment and vaccines. Historically low rainfall will additionally stretch finances, probably forcing Brazil to begin sourcing power from thermal power plants, which have higher operating costs than hydroelectric dams. The need for high public sector emergency spending during Q3 will likely set Brazil on the path to surpass its constitutionally mandated spending cap, a key indicator for investors.</p><h3>A Divided Opposition Bolsters Maduro</h3><p>Internal divisions over whether to negotiate with the government will weaken Venezuela&#39;s opposition and allow President Nicolas Maduro&#39;s regime to consolidate its power. Venezuela&#39;s opposition will debate whether to engage in negotiations with Maduro&#39;s regime after the U.S. proposed lifting sanctions in exchange for concessions during negotiations. This will result in divisions in the opposition over whether to back interim President Juan Guaido&#39;s position that negotiations must result in free elections and the position that the anti-Maduro camp should demand smaller concessions from the government. Continued U.S. insistence that <a href="/article/reviewing-role-and-effectiveness-sanctions">sanctions relief</a> can only follow free elections will leave little room for compromise between opposition factions. While U.S. negotiations with the Maduro regime are unlikely in Q3, internal disagreements among the opposition will further cement Maduro&#39;s control of the country.&nbsp;</p><h3>Mexico&rsquo;s Lopez Obrador Seeks Other Means of Undoing Energy Reform</h3><p>After losing the ability to force through constitutional reform, Mexican President Andres Manuel Lopez Obrador will explore other methods to facilitate his vision of restoring energy nationalism, a strategy likely to fail. <a href="/article/mexicos-lopez-obrador-loses-ground-midterm-congressional-election">June legislative elections</a> saw the National Regeneration Movement (MORENA) lose seats in Congress, decreasing the likelihood that Lopez Obrador will be able to enact constitutional change to bolster state-owned energy companies during the remainder of his presidential term. As a result, the MORENA coalition will likely begin to explore new avenues to <a href="/article/mexico-new-electricity-law-risks-unplugging-energy-projects">limit private sector investment</a> during Q3. The government will likely continue to implement institutional mechanisms and presidential decrees to adjust the regulatory environment and boost state-owned energy companies. As Lopez Obrador will retain influence over energy regulators through a congressional simple majority, he may influence them to halt new rounds of bidding for oil and gas projects. Absent a constitutional change to reverse the 2013 energy reforms &mdash; which opened the country&#39;s energy sector to private investment &mdash; Lopez Obrador&#39;s policies will likely continue to meet judicial challenges and ultimately fail.</p><h3>Latin America Will Continue to Rely on Russian, Chinese COVID-19 Vaccines</h3><p>Though the United States will send shipments of COVID-19 vaccines throughout the region, <a href="/article/south-america-s-response-p1-covid-19-threat">Latin American countries</a> will continue to rely on Russian and Chinese vaccine shipments to facilitate the majority of their inoculation efforts. The United States has promised to export at least 80 million doses of Pfizer, AstraZeneca and Johnson &amp; Johnson vaccines around the world, primarily through the World Health Organization&#39;s COVAX mechanism over the span of Q3.&nbsp;<br />&nbsp;</p>

<p>While the U.S. decision will likely help some Latin American countries&#39; vaccination efforts, the initial investment of 20 million doses spread across 13 countries in the region means that the impact of U.S. help will be modest. Thus, Latin American countries will likely remain dependent on Chinese and Russian vaccines, but will be unlikely to reach the threshold of vaccinating 70% of their populations during the quarter. U.S. vaccine diplomacy meanwhile may dissuade the governments of Guatemala, Honduras and Paraguay from switching diplomatic alliances from Taiwan to China in exchange for vaccines.</p>

<p><strong>July 4: </strong>Chilean Constitutional Convention begins constitution-drafting process.<br /><strong>July 28: </strong>Peru&#39;s new president takes office.<br /><strong>Sept. 23: </strong>Argentina holds primary elections for November legislative elections.<br />&nbsp;</p>

South Asia

<h3>Regional Players Step in Where the U.S. Leaves off in Afghanistan</h3><p>Afghanistan&rsquo;s neighbors Russia, Iran, China and Pakistan will increasingly become involved in counterterrorism efforts as the United States prepares to complete its troop withdrawal by Sept. 11. Peace talks between the government will remain unlikely to pan out and <a href="https://worldview.stratfor.com/article/afghanistan-s-geography-20-years-after-us-invasion">ethnic divides will deepen</a> amid the post-U.S. power vacuum. Attacks by the Taliban and Islamic State Khorasan Province will increase, and warlord-led Tajik, Uzbek and Hazara militias will begin mobilizing since the absence of foreign troops will increase the threat Sunni extremist groups will attack their communities. Iran and Pakistan will play both sides, reaching out to the Afghan government and the Taliban to protect their relations with the eventual victor of the ongoing power struggle. Tehran and Islamabad will also become more involved in combatting terrorism emanating from Afghanistan by funding proxies or supplying arms to other regional countries&rsquo; counterterrorism efforts. As the threat to Pakistan grows, Russia and China will assist Islamabad by supplying arms or monetary assistance in an attempt to protect their respective infrastructure projects currently under construction throughout Pakistan.<br />&nbsp;</p>

<h3>India&rsquo;s Economy Struggles Amid the Fallout From Past and Future COVID Waves</h3><p>The Indian <a href="https://worldview.stratfor.com/article/covid-19-surge-sets-back-india-s-economy">economy will continue to struggle</a> as the country deals with the fallout from a devastating second wave of COVID-19 and as a third wave looms. While the Indian government claims that economic growth will be robust in 2021 and on target with its original 10.5% growth forecasts, institutions including the OECD, the World Bank, the State Bank of India and Reserve Bank of India have all lowered their GDP projections for the country from around 10-13% to roughly 8-9% because of the negative impact of the pandemic on the economy. Despite this, the RBI chose to keep its benchmark rate unchanged at 4%, likely in an effort to support a Q3 stimulus package.</p><p>Unemployment is unlikely to improve significantly as vaccination shortages force states to rely on shutdowns and other restrictive measures to combat the spread of the virus. Although the unemployment rate is likely to drop from its 12-month high of 11.9% in May, the decline will not be substantial enough to counter the reduction in purchasing power of the average consumer. This will continue to have adverse effects on the retail and automotive sectors. Financial sector risk will rise as creditors default on loans amid closures and job losses. The Indian government is unlikely to achieve its goal of vaccinating 10 million people per day by mid-July and early August because the domestic production of vaccines cannot meet the demand. As a result, India will remain reliant on foreign donations of vaccines, which will not meet its domestic needs. Worse, a probable third wave of infections will continue to delay the full recovery of the country&rsquo;s economy.</p><h3>India Unlikely to Meet Its Global Vaccine Contribution Promises</h3><p>India is unlikely to fulfill its promised contributions to world vaccine supplies before the end of Q3, forcing many developing countries to turn to Russia, China and the United States for assistance, but that might not be enough to avoid the negative economic impact of slow vaccination programs in low-income countries. India will likely keep its export ban in place for the rest of Q3 to meet domestic demand, creating <a href="https://worldview.stratfor.com/article/india-s-covid-19-surge-leaves-world-scrambling-vaccines">supply problems for low-income countries</a> that may not receive sufficient doses through other global programs. Global inoculation efforts are heavily reliant on the AstraZeneca vaccine, which was expected to account for almost half of the vaccine supply for lower and middle-income nations and a third of the supply for low-income nations. With India originally set to produce 33% of the world&#39;s AstraZeneca shots, its inability to contribute to global supplies will significantly impact these countries. Although the United States recently pledged to provide 80 million doses to low-income countries, many nations will increasingly have to revert to lockdown measures that hinder economic growth to combat the virus&rsquo;s spread. Insufficient vaccine supplies will not only impede recovery in those nations, it will also impact global economic recovery efforts as travel restrictions remain in place and production and manufacturing rates remain low.&nbsp;<br />&nbsp;</p>

<p><strong>July: </strong>Date by which Indian manufacturers are expected to produce 135 million COVID-19 doses for domestic consumption.<br /><strong>July: </strong>Monsoon session of Indian parliament commences.<br /><strong>Sept. 11: </strong>U.S. deadline for completing its troop withdrawal from Afghanistan.<br /><strong>September/October: </strong>Date by which the Indian Institute of Technology Kanpur projects a third wave of COVID-19 will start in India.<br />&nbsp;</p>

French soldiers monitor a rural area during Operation Bourgou IV on Nov. 10, 2019, in northern Burkina Faso, along the border with Mali and Niger.

Sub-Saharan Africa

<h3>Slow Vaccine Rollouts Will Prolong Pandemic Pain</h3><p>COVID-19 vaccine rollouts in sub-Saharan Africa will remain slow, increasing the risk of another wave of outbreaks and more restrictions in some countries, delaying their economic recoveries. Vaccine nationalism, global shortages and logistical issues are causing vaccine dose scarcity in Africa. COVAX aims to supply some 600 million doses to Africa, but many of these depend on India, which may delay exports due to its own struggles with the pandemic. Countries like Kenya and Ghana have introduced delays between doses due to shortage concerns, while other countries such as Uganda have announced new restrictions as their numbers of COVID-19 cases hit record levels. Following the death of President John Magufuli in March, Tanzania will start accepting more vaccines and is likely soon formally to join COVAX.&nbsp;</p><h3>Ramaphosa Doubles Down on Anti-Corruption and Business Reforms</h3><p>South African President Cyril Ramaphosa will aim to strengthen his position within the ruling African National Congress (ANC) ahead of municipal elections in October by doubling down on an anti-corruption campaign and his pro-business <a href="/article/south-africa-s-economic-reality-will-dim-any-hopes-quick-recovery">economic reform strategy</a>, though electoral calculations may force him to water down his plans. Through corruption charges, Ramaphosa has effectively sidelined figures close to former President Jacob Zuma, which will strengthen his control over the party and give him more space to implement economic reforms. Many of Ramaphosa&#39;s pro-business reforms, such as cutting the government&#39;s wage bill and making South Africa&#39;s labor market more flexible, are deeply unpopular with the working class that has historically been the ANC&#39;s bedrock. As a result, while the ANC remains the only dominant South African party nationally, it is weakening before the municipal elections, something both major opposition parties, the leftist Economic Freedom Fighters and the centrist Democratic Alliance, will seek to exploit. All of these forces will still impede the full implementation of Ramaphosa&#39;s reforms even though he will be able to make small gains as he consolidates power in the ANC.&nbsp;</p><h3>An International Intervention in Mozambique Gets off to a Slow Start</h3><p>Mozambique and the Southern African Development Community will begin their regional intervention in Cabo Delgado against the Islamic State-backed militancy, but progress will be slow. The intervention was approved June 23, but many of the final details of the intervention will be negotiated during the third quarter. While the SADC will negotiate with member states on exact contribution levels, the force is likely to be largely South African and Zimbabwean.</p>

<p>It will also negotiate with international powers like the United States and Europe on funding levels and international organizations and like the U.N. Security Council on any specific authorization needed for the intervention. As such, the path from the announcement of the intervention to the deployment to the start of significant operations will be lengthy, limiting the impact on the insurgency in the third quarter.&nbsp;</p><h3>Ethiopia&#39;s Abiy Tightens His Grip as Conflicts With Tigray and Sudan Continue</h3><p>Ethiopian Prime Minister Abiy Ahmed will further centralize his control over the country, but conflicts with Sudan and the Tigray Region will continue. The international community and opposition figures will view June parliamentary elections as fraudulent, as they were not held in three of Ethiopia&#39;s 12 regions or in dozens of other constituencies, although some of the delayed elections are scheduled for September. Abiy&#39;s alliance with the ethnic Amhara political elite will constrain his ability to resolve conflicts with Sudan and in the Tigray region. The <a href="/article/conflict-tigray-has-major-implications-ethiopia-and-region">humanitarian crisis in Tigray</a> is likely to worsen and as concerns about famine and violence grow, making more Western governments willing to impose targeted sanctions on Ethiopia to encourage the Ethiopian government to negotiate with Tigrayan political leaders. Abiy meanwhile will continue his economic liberalization agenda, including the possible re-tender of a telecom operating license and further privatization efforts, as with Ethio telecom.&nbsp;</p><h3>A Legal Case Slows Political Reform in Kenya</h3><p>Kenya&#39;s Building Bridges Initiative (BBI) will not be implemented in its entirety unless the government can win a <a href="/article/kenyan-court-blocks-government-s-plan-reshape-itself">legal case holding it up</a>, which means that the risk of political violence will remain high. The BBI initiative aims to make Kenya&#39;s political system more representative by diffusing political power through creating the office of a prime minister and creating more local constituencies with greater power in hopes of reducing political violence. President Uhuru Kenyatta and opposition leader Raila Odinga hoped to conclude the BBI referendum implementing constitutional reforms by August 2021 so that the new counties created by the reforms could be included in August 2022 elections. An appellate court will not, however, begin hearing a legal challenge against the plan until June 29. If the court rejects the BBI plan, Kenyatta and Odinga will consider legislative ways to implement aspects of it. Efforts to push the reforms through legislatively risks additional legal challenges and potentially politically motivated violence in the lead-up to next year&#39;s elections.</p><h3>France Tries to Reduce Its Footprint in the Sahel</h3><p>France will continue discussions with regional and European countries on <a href="/article/sahel-french-exit-will-be-easier-said-done">shifting more of the military burden</a> onto their shoulders following the announcement that Operation Barkhane would end. In the third quarter, France will pressure Chad&rsquo;s and Mali&#39;s transitional governments to maintain their commitments to their respective 18-month transition to inclusive elections as a way to improve regional government&#39;s political stability and their ability to implement political, social and economic reforms that address some of the foundational issues that have led to the Sahel&rsquo;s insurgent movements.</p>

<p>France will also seek to gain more European support for a French-led European task force that is now being deployed to the region to carry out counterterrorism operations and eventually, replace some of France&#39;s solo operations. Burkina Faso&rsquo;s and Mali&#39;s governments will continue to entertain negotiations with some of the jihadist groups, but Paris will continue to oppose talks &mdash; limiting any gains from them.</p>

<p><strong>July: </strong>Somali presidential election.<br /><strong>July 18: </strong>Sao Tome and Principe presidential election.&nbsp;<br /><strong>Aug. 12: </strong>Zambia general elections.&nbsp;<br /><strong>Sept. 6: </strong>Second round of Ethiopian parliamentary elections in Somali and Harari regions.<br /><strong>Oct. 27: </strong>South African municipal elections.</p>

2021 THIRD-QUARTER FORECAST

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