Americas

We expect most of the world to adopt a "live-with-COVID" strategy that seeks to keep economies as open as possible and to avoid the recession-provoking policies of 2020 and parts of 2021.

Annual

Global Trends

<p>The global economy will continue its uneven recovery amid progress in COVID-19 vaccinations in most developed countries, lagging vaccinations in much of the rest of the world and the threat of new outbreaks. While global growth will be relatively strong, it is likely to slow from 2021 due to setbacks from the pandemic, persistent supply chain disruptions, higher inflation and tightening financial conditions, as well as constraints on public spending in many countries as they cope with high levels of debt and increased interest rates. U.S. growth will moderate in 2022 after unprecedented fiscal stimulus in 2020-2021. The United States will probably not feel the impact of increased infrastructure spending until after 2022 given project lag times. In addition, the fiscal stimulus plus lax monetary policy have left the United States on a high but unsustainable growth path that will increase inflation and lead the U.S. Federal Reserve to increase interest rates beginning in 2022, which will slow down GDP expansion. In China, restrictions on lending to private development firms will impact overall growth as property investment and services account for nearly 30% of GDP. The property slowdown will also impact provincial revenues from land sales and spending levels. As a result, China&rsquo;s growth in 2022 may end up being less than its 2021 target of above 6%. Low vaccination rates and widespread scarring that has reduced potential output are likely to delay the return to pre-pandemic GDP levels in many emerging markets and developing countries. In addition, the omicron variant of COVID-19 and other potential variants could worsen supply-side bottlenecks affecting all economies worldwide.&nbsp;<br />&nbsp;</p>

Global Economic Growth Remains Strong, but Slows 

<p>Global inflation will persist well into 2022 driven by higher labor prices, higher commodity prices, higher housing prices and tighter financial conditions as central banks respond and term and risk premiums increase. Headline prices for food and energy will remain high with food prices nearing record levels at end 2021, partially driven by labor shortages in food-producing countries and prices for fertilizer affected by higher oil prices. Inflation expectations have increased slightly, creating the risk of a wage-price spiral as households try to maintain their purchasing power. Supply chain bottlenecks, caused by a mismatch between strong global demand and supply disruptions along with global labor shortages, are expected to persist well into 2022 if not for the entire year. Some supply frictions may ease, but overall <a class="connectedContentTrigger" href="/article/world-braces-period-high-energy-prices" data-nid="335137" type="Assessments" title="The World Braces for a Period of High Energy Prices" data-timestamp="1633122940">higher costs for fuel</a>, freight, inventory financing and storage are compounded by labor market shortages that may be long-lasting and structural, with many people not returning to the workforce because of early retirements, child care issues, reluctance to take customer-facing jobs, and skills or location mismatches, among other reasons.&nbsp;</p>

Global Inflation Will be Higher and Longer Lasting

<p>Inflation concerns will push many central banks to <a href="/article/upshot-us-fed-s-impending-taper">reduce their monetary stimulus</a> and liquidity support and to anticipate interest rate increases, heightening the risk of sovereign debt crises. The U.S. dollar will remain strong overall as real interest rate differentials decline. A strong dollar typically corresponds to reductions in global investor risk appetite and there may be slowdowns in global capital flows to emerging markets. Some countries with large foreign exchange debt and/or fiscal financing needs could be vulnerable to changes in risk sentiment and shifting investor expectations, with Argentina, Brazil, South Africa and Turkey among large emerging markets especially at risk. Smaller economies, such as Ghana and Kenya, may also face increased risk premiums and possibly shortfalls in financing at acceptable interest rates that could slow imports and economic growth. Record high levels of debt will restrain government spending and limit the ability of many countries to undertake new social expenditures, which could fray social safety nets and lead to social unrest.</p>

Public Debt Vulnerabilities Will Increase

<p>Economic tensions between the United States and China will likely remain high in 2022 as the former restricts the latter&rsquo;s access to Western technology and keeps high tariffs on Chinese goods. The administration of U.S. President Joe Biden has shown little willingness to ease some of his predecessors&rsquo; restrictions on Chinese trade and will probably launch a new Section 301 investigation into Chinese industrial subsidies to use as leverage in trade talks with Beijing. However, China will continue heavy state support for strategic industries and the Biden administration may use the investigation to modify which Chinese goods are subject to higher tariffs. The White House&rsquo;s continued use of tariffs as a policy tool likely means that the restrictions put into place will last years, if not decades. Failure to make progress in talks may lead to an increase in tariffs on goods in sectors China directly supports, which includes the steel and green technology sectors, and a decline in sectors where China&rsquo;s support is more limited, such as low-end manufacturing. The United States will also expand some of its restrictions on China&rsquo;s access to foreign technology, particularly in high-tech sectors including AI, robotics and semiconductors. The U.S. strategy will only result in China doubling down on its techno-nationalist strategy, making the Chinese business environment all the more complicated for Western firms.&nbsp;</p>

Continued U.S.-China Tensions on Trade and Tech

<p>The European Union and the United States will place more regulations on large tech firms in 2022, but divergences over priorities will make substantial U.S. legislative reforms difficult and potentially delay or water down EU proposals. Midterm 2022 elections in the United States will renew momentum on Capitol Hill to pass new legislation targeting tech companies, but Democrats will focus on issues like Amazon&#39;s dominant e-commerce position while Republicans will be more concerned with issues like Meta&#39;s content moderation policy, making substantive bipartisan legislation unlikely. As a result, the bigger push is likely to come from regulators like the Federal Trade Commission and the Justice Department, which can have a more immediate impact on companies through investigations &mdash; such as through the FTC&#39;s antitrust powers &mdash; but whose decisions are subject to greater legal scrutiny. The European Commission will introduce legislation underpinning proposed digital markets and digital services acts in the European Parliament next year. But progress will be slow due to conflicting goals among EU member states, particularly as tech-friendly countries like Ireland will seek to protect their own industries. The <a href="/article/race-boost-semiconductor-manufacturing-global-powers-take-their-marks">semiconductor shortage</a> will persist into 2023 due to continued high demand and insufficient growth in capacity, undermining recoveries in semiconductor-consuming industries like the automotive sector. The shortage will only reinforce Brussels and Washington&#39;s attempts to support their own chip making industries, though their progress will be slow.&nbsp;</p>

Western Pressure on Big Tech and Big Social Continues, but Different Priorities Will Limit Coordination

<p>Global energy supplies will remain tight to start the year, which may lead to significant price escalation in early 2022 that could undermine the global economic recovery and cause social unrest in some oil- and natural gas-importing countries. OPEC+&#39;s conservative approach to production policy will probably keep a floor on global oil prices in the first half of the year of around $70 per barrel with the potential for prices to reach $80 or even $90 per barrel, barring omicron or another variant of COVID-19 causing widespread lockdown and travel restrictions and so curbing oil demand. Global LNG and natural gas supplies will be constrained in the first quarter as <a href="/article/essential-geopolitics-will-gazprom-benefit-europes-energy-crisis">Russia withholds large volumes from Europe</a>, making price spikes over $30 per mmBtu &mdash; roughly equivalent to oil prices above $175 per barrel &mdash; likely throughout the Northern Hemisphere&#39;s winter even though prices could fall substantially in the summer. The risk of social unrest over high fuel prices in places like Brazil, India Nigeria and South Africa will remain high, pressuring governments to expand subsidies or social spending mechanisms or price caps to mollify protesters, risking widening fiscal deficits in the process. Higher oil prices will continue to improve economic conditions in major oil-exporting countries, though they will probably not erase some of the fiscal and economic challenges created by years of low prices.</p>

Oil and Natural Gas Price Volatility Undermine Global Economic Recovery

<p>Differing opinions on the pace and funding of the <a href="/article/geopolitics-climate-change-race-new-energy">energy transition</a> will limit global cooperation on climate change, but investor and shareholder pressure will mount on companies to adopt more aggressive corporate policies to reduce climate and emissions-related risks. There will be fewer pledges by countries to reduce emissions in 2022 compared to 2021 because there is no looming <a href="/article/essential-geopolitics-whats-table-cop26">Paris Agreement deadline</a> to tighten accords. This means that countries backing slower changes, like China, India, Russia and Saudi Arabia, will not face as significant of pressure to make tighter commitments as India and the developing world continue to tie their commitments to the availability of international financing. Meanwhile, increased investor focus and legal pressure on the private sector will continue to force companies to unveil more aggressive emissions pledges. While companies in the financial, oil and gas and energy-intensive sectors will face the most scrutiny, pressure to make stronger commitments will also increase on companies viewed as enablers for emissions, like insurers and technology companies supporting oil and gas companies and auto manufacturers whose products use hydrocarbons. Meanwhile, financial instruments underpinning the energy transition, such as carbon trading market linkages, carbon future contracts and carbon neutral energy products, will be more widely adopted and used.<br />&nbsp;</p>

Post-COP26 Climate Change Progress Shifts from Countries to Companies

<p>Financially-motivated cyberattacks will grow rapidly in 2022, particularly as criminals increasingly target 5G, cloud computing and IoT devices, causing more disruptions and an increase in new cybersecurity requirements in Western countries. U.S. diplomatic pressure on the Kremlin and law enforcement to crack down on Russian ransomware gangs, along with offensive cyber operations pressure on cybercriminals, will not reverse the growing number of cyberattacks (particularly ransomware attacks) against U.S. organizations. The U.S. campaign may disrupt some activities of individual groups or force them to reconsider attacking U.S. critical infrastructure. But the plethora of cybercriminals and growing cybercrime marketplace will ensure 2022 will see a continued uptick in ransomware attacks. Many smaller groups have also shown little interest in stopping attacks against companies operating in sectors the United States defines as critical infrastructure. The growth in ransomware attacks will result in new regulations around ransom payments and cybersecurity requirements, adding more regulatory hurdles and higher compliance costs for many Western organizations. Stronger U.S. cybersecurity requirements and the U.S. retaliation campaign will lead to cybercriminal organizations broadening the horizon to increase the number of attacks in other regions, including Europe, the Middle East, South Asia and Asia-Pacific. The ransomware plague that has infected the United States will, in turn, become more global as multilateral efforts to reduce this activity continue to face difficulties.&nbsp;<br />&nbsp;</p>

More Cyberattacks in More Places

<p><strong>Jan. 4: </strong>OPEC+ oil production policy meeting set to recur monthly until April.<br /><strong>April 5-April 11 or April 18-April 24:</strong> IMF-World Bank Spring Meetings in Washington.<br /><strong>June 29-30:</strong> 2022 NATO Summit in Madrid.<br /><strong>Sept. 13: </strong>U.N. General Assembly meeting begins.<br /><strong>Sept. 30:</strong> OPEC+ oil production cuts set to end.<br /><strong>October:</strong> IMF-World Bank annual meetings in Marrakesh, Morocco.<br /><strong>Oct. 30-31:</strong> 2022 G-20 Bali summit.<br /><strong>Nov. 8:</strong> U.S. midterm elections.<br /><strong>Nov. 8-20: </strong>COP27 in Cairo.<br />&nbsp;</p>

Key Calendar Dates

Asia-Pacific

<h3>Greater Regulatory Uncertainty in China</h3><p>China&rsquo;s regulatory campaigns will broaden to more <a href="/article/china-suspends-didi-app-enforce-national-data-sovereignty">industries that process data</a>, provide essential goods and services, exacerbate economic risks and challenge Beijing&rsquo;s cultural conservatism &mdash; raising global business uncertainty and compliance risks. The Chinese government will continue to build policies upon the foundation of the Cybersecurity Law, Data Security Law, and Personal Information Protection Law to <a href="/article/china-data-export-rules-signal-new-era-hands-governance">strengthen its control over growing digital services industries</a>. But compliance uncertainties will persist because these regulations are based on broad definitions of national security. <a href="/article/e-yuan-china-s-government-cements-its-hold-economy">Sectors that generated systemic economic risks</a> in 2021 (like real estate and fintech services) will be subject to more credit restrictions, merger and acquisition regulations, and leadership investigations, as well as stricter data monitoring in 2022 as President Xi Jinping seeks to stabilize the Chinese economy ahead of the <a href="/article/ccps-100th-anniversary-paves-way-xis-third-term">start of his third term in November</a>. Consumer price inflation and supply chain irregularities will push Beijing to intervene in markets for essential goods (e.g. food and pharmaceuticals) to stabilize prices, boost consumption, and support small- and medium-sized enterprises. Xi&rsquo;s efforts to <a href="/article/china-s-family-education-law-portends-unrest-and-political-opposition">fight demographics, societal disloyalty and cultural &quot;Westernization&quot;</a>&nbsp;to secure China&rsquo;s national rejuvenation (as a leading superpower) in a tense international environment will prompt regulatory scrutiny of online content, e-commerce and entertainment, among other avenues of ideology. This will breed business uncertainty and push private investment into safer sectors crucial to Beijing&rsquo;s development plans, like semiconductors and renewable energies. Compliance burdens for data-heavy firms will multiply as Western laws limiting foreign political influence clash with Beijing&rsquo;s data sovereignty policies. And though Beijing will push some economic reforms, like incremental IP protections, Western and Chinese sectoral restrictions will outpace reforms, generally eroding the business environment. Nonetheless, state-led investment and the global demand for Chinese exports will continue to buoy China&rsquo;s economy, albeit at a slower pace of growth than in 2021.</p><h3>Hong Kong Deepens Alignment with Chinese Policies</h3><p>The government of Hong Kong will further align with China, hindering its trade prospects and accelerating the search among foreign companies for alternative Asian financial hubs. Hong Kong Chief Executive Carrie Lam has pledged to focus economic reopening on strengthening trade and investment with mainland China and hewing closely to China&#39;s &quot;zero-tolerance&quot; COVID-19 management strategy. Even if Lam is unseated in March elections, her pro-Beijing replacement will act similarly. The government will use the <a href="/article/chinas-security-law-ushers-new-and-uncertain-era-hong-kong">expanded National Security Law</a> to monitor citizens&#39; online comments, charge individuals for nonviolent protest participation, monitor actions against vaguely defined national security interests and wipe out political opposition to Beijing. Hong Kong&#39;s sheltered economy will be less competitive than its Asian neighbors in the first half of 2022 as the rest of Asia reopens. <a href="/article/mainland-finalizes-and-implements-hong-kong-electoral-reforms">Hong Kong&#39;s judicial and legislative independence</a> will further deteriorate; combined with the territory&#39;s focus on Chinese trade relations, this will push businesses to consider alternative destinations for an Asian financial hub like Singapore or Tokyo.</p><h3>The China-Taiwan Divide Widens</h3><p>China-Taiwan tensions will deepen amid growing Western support for Taiwan. But <a href="/article/does-beijing-plan-invade-taiwan">Beijing will not act militarily against Taiwan</a>, and Taiwan&rsquo;s global semiconductor trade will remain secure. As the United States and Europe pivot strategically to Asia, their support will grow for Taiwan&rsquo;s de facto independence via freedom of navigation operations and strengthened (though still unofficial) diplomatic relations. China will punish Taiwan supporters in the West with trade and investment restrictions and diplomatic campaigns. Similarly, <a href="/article/evolving-taiwan-china-relationship-part-2-politics">Taiwan and China will levy more political laws</a> against the other, like Taiwan&rsquo;s efforts to stem brain drain in its vital tech industries and China&rsquo;s new policy of punishing politically errant Taiwanese businesses. Despite its concerns about Taipei, Beijing will eschew military action that could isolate China diplomatically and jeopardize its <a href="/article/evolving-taiwan-china-relationship-part-1-economy">access to Taiwan&rsquo;s cutting-edge semiconductor exports, which China needs</a> for critical tech industries like AI and autonomous vehicles. Beijing&rsquo;s trade restrictions against Taiwan-supporting nations will further entrench Western security and human rights concerns, decreasing chances for rapprochement with China. In Taiwan, greater Chinese political coercion will increase the odds of the ruling Democratic Progressive Party (DPP), which has pushed to protect the island&#39;s sovereignty from China, in 2022 local elections. If those elections yield significant DPP gains, Beijing could further increase political pressure on Taiwan, even as formal aggression remains unlikely. Chinese incursions into Taiwan&rsquo;s air defense zone could prompt an incident (like an aerial collision) that brings brief trade disruptions, but both sides will deescalate to avoid a broader conflict.</p><h3>Growing U.S. Coalition in Maritime Asia</h3><p>U.S. strategic partners in Asia will strengthen defense capabilities and Western ties amid growing concerns about China&#39;s military activities, increasing the probability of small-scale maritime conflicts. In the meantime, Asian middle powers will seek to enhance their trade ties with China to bolster their economic recoveries. Worsening relations with China, driven mainly by Beijing&#39;s expanding maritime presence in disputed territories and advancing naval capabilities, will motivate <a href="/article/new-threats-test-new-zealand-s-approach-chinese-encroachment">traditional U.S. Asian allies to bolster maritime defense</a> capabilities and <a href="/article/strategic-implications-new-us-uk-australia-defense-partnership">deepen Western military ties</a>. Intraregional arms deals will also proliferate, largely between U.S. allies or partners, as countries pursue long-delayed defense upgrades in the face of regional tensions. Despite potential leadership changes in places like Australia and the Philippines, strategic alignments vis-a-vis U.S.-China competition will not significantly change due to the strategic imperative of defending the near seas and avoiding Chinese naval dominance of key shipping lanes. Middle powers like Malaysia and Indonesia will largely avoid picking sides in order to use deeper trade ties with China to drive their economic recoveries. North Korea will reopen economic channels and consider new peace talks, which may yield small concrete steps toward sanctions relief, but a new administration in South Korea could slow the pace of talks. Amid this securitization of the region, there is a chance of brief <a href="/article/philippines-clarifies-its-threshold-triggering-us-military-support-south-china-sea">maritime incidents between China and other South China Sea claimants</a> (including maritime collision, naval harassment, or arrests at sea) that result in diplomatic and/or trade disputes. Expanded attempts by Vietnam, the Philippines and Indonesia to move forward with exploration and/or production of subsea resources despite Chinese concerns will increase the likelihood of conflict.</p>

<h3>Southeast Asia Pursues Reopening</h3><p>Asian economies other than China will accelerate reopening, and the prospect of renewed COVID-19 restrictions in poorly vaccinated and risk-intolerant nations may breed social unrest and more temporary manufacturing relocations. Most ASEAN countries will proceed with the reopening strategies they began in late 2021 &mdash; especially for tourism &mdash; regardless of brief setbacks from any new COVID-19 waves. Less vaccinated countries like Indonesia, Laos, Myanmar, the Philippines and Vietnam that are hit by new waves are still unlikely to revive the kind of strict, extended lockdowns seen during the delta variant wave. But risk-averse administrations in Australia, Japan, New Zealand, South Korea and Taiwan will more readily bring back domestic restrictions, which could have particularly negative impacts on the services sector, but they, too, will avoid major export disruptions. China and Hong Kong, however, will maintain their zero-tolerance strategy to pandemic management through quarter one and perhaps quarter two as Beijing waits for COVID-19 to subside in Asia and for the Beijing Olympics to end. New movement restrictions could exacerbate civil unrest in Australia while a slow economic recovery in Thailand, worsened by mainland-bound Chinese tourists, could catalyze <a href="/article/gauging-thai-government-s-response-growing-protests">renewed political protests</a> against the military-backed monarchy. COVID-19 waves in less vaccinated ASEAN countries could induce short-term manufacturing relocations, but regionally, the trend of relocations will lessen compared to 2021.<br />&nbsp;</p>

Key Trends for 2022

<p><strong>Jan. 1:</strong> Regional Comprehensive Economic Partnership enters effect.<br /><strong>Feb. 4-20: </strong>Beijing hosts the Winter Olympics.<br /><strong>March 9:</strong> South Korean presidential election.<br /><strong>March 27: </strong>Hong Kong chief executive election.<br /><strong>May 31:</strong> Last day Australia can hold elections for the Senate and, likely, the Lower House, which could yield a new prime minister.<br /><strong>May: </strong>Taiwanese local elections.<br /><strong>November:</strong> Chinese President Xi Jinping will almost certainly begin his third term as general secretary of the Communist Party of China.<br />&nbsp;</p>

Europe

<h3>Economic Headwinds Ahead</h3><p>Factors including high inflation, high energy prices, labor shortages, new COVID-19 variants and supply chain bottlenecks will create constraints for the EU economy in 2022. The rebound in economic activity in Europe, <a href="/article/another-covid-19-surge-risks-slowing-europe-s-recovery">which was robust during most of 2021</a>, will lose momentum in 2022 as uncertainty persists for households, companies and investors. Sporadic COVID-19 outbreaks will negatively impact economic activity, <a href="/article/europe-s-pandemic-rattled-tourism-sector-braces-another-tough-year">especially in the services sector</a>, which is particularly vulnerable to lockdown measures. Temporary shortages of products ranging from semiconductors to primary goods will also negatively impact the bloc&#39;s manufacturing sector. Persistently high inflation will lead to an internal debate within the European Central Bank over the future of stimulus measures, and the bank will end its emergency assets-purchasing program in March. But the institution is likely to keep an expansionary monetary policy in place for most if not all of the year to support growth, which means that borrowing costs should remain accessible for the public and private sectors. The rise in food and energy prices, in the meantime, will create fertile ground for social unrest, especially in Southern and Eastern Europe, potentially forcing governments to continue or even expand their welfare measures at the cost of pervasively high fiscal deficits that could create debt crises in the long term.<br />&nbsp;</p>

<h3>A Crucial Presidential Election in France</h3><p>France is likely to elect a moderate government that supports EU membership and does not significantly disrupt the country&#39;s social and economic model. France&#39;s presidential and National Assembly elections in April and June will probably result in a moderate executive and legislature that will keep the country in the eurozone, defend cooperation with Germany, seek greater economic and security autonomy for the bloc, and push for reforms to make the country more attractive to foreign investors. In a low probability but high risk scenario, a far-right candidate could win the presidency and lead the next government. While this would not immediately threaten France&#39;s position in the eurozone, it would raise long-term concerns about the country&#39;s membership in the currency area. It would also disrupt the policymaking process in the European Union because the new government would prioritize protecting French sovereignty at the expense of EU collaboration. The election of a far-right president would also result in unrest among minority groups and protests from the left, some of which could turn violent. Either a far-right or a far-left government would seek to isolate France from global markets, free trade agreements and foreign investment.</p><h3>Increased Coordination Between France and Germany&nbsp;</h3><p>Policy coordination between France and Germany will increase, opening the door to more flexible EU fiscal rules, continued support for the energy transition and a more protectionist approach to investment. Greater ideological alignment between France&rsquo;s moderate government and Germany&rsquo;s pro-EU coalition will result in more consistent policy cooperation with Italy and Spain and an overall <a href="/article/how-brexit-would-undermine-europes-balance-power">movement of the EU axis of power to the south of the Continent</a>. Paris, Berlin, Rome and Madrid will push to make the bloc&rsquo;s sovereign debt and fiscal deficit rules more flexible, especially when it comes to spending on climate-friendly reforms and the digitalization of the economy, which will open the door to a prolonged period of expansionary economic policies. While a debt crisis is unlikely in 2022, these expansionary policies mean that many eurozone members <a href="/article/southern-europe-s-covid-19-crisis-just-beginning-eu-italy-france-spain-greece-portugal-coronavirus-economy-politics">will not substantially reduce their debt burdens in the short-to-medium term</a>. France and Germany will also pressure the European Commission to increase oversight of foreign takeovers in strategic sectors of EU economies and push for laxer antitrust rules within the European Union to create &ldquo;European champions&#39;&#39; in multiple sectors to compete with rivals from the United States. and China. Northern European countries like the Netherlands and Sweden will push against most of these policies but, left in the minority, they will only manage to water down or delay some of them with limited power to block them. Progress will be more modest on the security front, as Berlin will be skeptical of Paris&rsquo; push for deeper military integration in the European Union. Central and Eastern European governments will also be reluctant to create new ways of cooperation that could rival NATO.</p>

<h3>The EU To Become More Defensive On Trade</h3><p>The European Union will also become more defensive on trade, delaying or freezing the signing of new trade deals. Under the new Franco-German leadership, the European Union will become more reluctant to sign trade and investment agreements, especially if they include agricultural products (a politically sensitive issue in many EU countries) or are negotiated with countries with poor environmental or human rights records. This will slow down ongoing negotiations with countries like Australia and delay the implementation of the deal with the Southern Common Market (aka Mercosur). While sectoral agreements with the United States are possible, a comprehensive free trade agreement will remain elusive. In addition, as a part of its Green Deal plans, the European Union will likely approve a carbon tax on products from countries with lower environmental standards. While the tax is unlikely to enter force in 2022, it will lead to trade disputes with countries like China, India, Russia and Turkey that could open the door to retaliatory tariff hikes and other forms of economic coercion. Brussels will seek cooperation with the United States on the implementation of the carbon tax, which will reduce the risk of trade disputes with the White House.</p><h3>Negotiating Post-Brexit Trade Deals</h3><p>The British government will prioritize negotiating free trade agreements and investment deals around the world, but progress will be slow. FTAs with Australia and New Zealand will probably enter force in early 2022, but other deals will prove more complex. The United Kingdom will start trade and investment negotiations with India and the Gulf Cooperation Council, but progress will be slow because of discrepancies over issues such as agricultural products, immigration rights and human rights concerns, which means that negotiations could continue well into 2023. London will also seek to speed up its entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, though the economic impact would be small considering that the United Kingdom already has bilateral FTAs with many of the group&#39;s members. While limited deals with the United States are possible (on issues such as lifting U.S. tariffs on British steel and aluminum) a comprehensive agreement is unlikely in 2022 due to differences on issues including agriculture and the pharmaceutical sector as well as procedural constraints in the U.S. Senate. These protracted negotiations will highlight the slow rebuilding of the United Kingdom&#39;s post-Brexit economy and will influence Britain&#39;s decision to preserve its trade ties with the European Union. London and Brussels are <a href="/article/end-brexit-dispute-over-northern-ireland-takes-shape">likely to reach a compromise to amend parts of the Northern Ireland protocol</a>. This will decrease the risk of their free trade agreement collapsing, though some frictions related to its implementation likely will remain. While the threat of social unrest in Northern Ireland will remain moderate because the terms of the compromise could irritate either Unionist or Republican groups, widespread violence is unlikely.&nbsp;</p>

<p><strong>Jan. 1:</strong>&nbsp;France to take over the rotating presidency of the European Council.<br /><strong>Jan. 30:</strong>&nbsp;Portuguese general election.&nbsp;<br /><strong>April:</strong>&nbsp;Hungarian general election.<br /><strong>April 10:</strong>&nbsp;First round of France&#39;s presidential election.<br /><strong>April 24:</strong>&nbsp;Second round of France&#39;s presidential election.<br /><strong>April 24:</strong>&nbsp;Slovenian general election.<br /><strong>June 12:</strong>&nbsp;First round of French National Assembly elections.<br /><strong>June 19:</strong>&nbsp;Second round of French National Assembly elections.<br /><strong>July 1:</strong>&nbsp;The Czech Republic assumes the rotating presidency of the European Council.<br /><strong>September:</strong>&nbsp;Austrian presidential election.<br /><strong>Sep. 22:</strong> Swedish general election.<br /><strong>Oct. 1:</strong>&nbsp;Latvian general election<br /><strong>Oct. 2:</strong>&nbsp;Bosnia and Herzegovina holds its general election.<br />&nbsp;</p>

Middle East and North Africa

<h3>Tense Iran Nuclear Negotiations Are High Risk, High Reward</h3><p>U.S.-Iran talks will likely yield a limited deal that sees Tehran reduce some of its nuclear activities in exchange for sanctions relief. The United States and its European allies&rsquo; strong desire to slow down Iran&rsquo;s nuclear development, along with Tehran&rsquo;s strong desire for sanctions relief and avoiding a major conflict, will keep compelling both sides to return to the negotiating table. But nuclear <a href="/article/iran-nuclear-talks-reach-critical-juncture">talks will continue to progress</a> slowly in a tense environment driven by divergent priorities that will make only the most basic of agreements possible. Such a limited deal would likely see either the United States unfreeze some Iranian assets in exchange for Iran halting nuclear program developments, or the United States and Iran both returning to a basic level of compliance with the 2015 nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA). Iran, however, will not scale back its nuclear program or aggressive regional behavior until a potential deal is reached in order to maintain its <a href="/article/rejecting-draft-nuclear-deal-iran-tests-us-s-limits">negotiating leverage</a>. And this &mdash; combined with the Iranian team&rsquo;s increasingly high expectations for Western concessions &mdash; will complicate talks and keep them at risk of falling apart in 2022, which would raise the risk of regional conflict (particularly between Israel and Iran). With a limited U.S.-Iran deal likely but far from certain, <a href="/article/rare-uae-iran-meeting-stirs-hope-eased-gulf-tensions">rapprochement</a> talks between Iran and the Arab Gulf states will also probably remain at an exploratory phase as Iran&rsquo;s neighbors seek to ensure their own security regardless of how JCPOA talks play out. A scenario in which talks fall apart, however, remains a distinct possibility. If negotiations fall apart due to Western dissatisfaction with Iran&#39;s regional behavior and nuclear developments or due to Iranian dissatisfaction with Western concessions, the risk of regional conflict will grow, particularly between Israel and Iran.&nbsp;</p><h3><b id="docs-internal-guid-938c367b-7fff-dfbc-fc95-bcfb36c8769f">T</b><b>he AKP in Pursuit of a Political Strategy</b></h3><p>Turkey&#39;s government will implement populist and nationalist policies at home and abroad ahead of the 2023 elections, potentially triggering <a href="/article/search-quick-win-erdogan-gambles-turkey-s-economic-future">fiscal</a>, economic, diplomatic and/or military crises. Uncertain about its electoral prospects in 2023, the governing Justice and Development Party (AKP) will pursue policies designed to curry favor with its traditional Islamist-nationalist base. It will seek to appeal to Islamists by citing religious tenets to justify controversial policies like keeping low interest rates at the central bank and weakening human rights protections if they contravene local religious values. To appeal to nationalists, it will initiate limited confrontations with the European Union in the Eastern Mediterranean, with the United States over Turkey&#39;s defense ties with Russia, and with Russia over Turkey&#39;s continued military intervention in Russian ally Syria. Though the AKP will, of course, try to avoid triggering a crisis, it is not positioned to ensure its high-risk policies do not spur unprecedented inflation, further capital flight and even a major debt crisis in 2022; its management of the lira is especially fraught. Meanwhile, Turkey&#39;s more aggressive foreign policy could trigger fresh sanctions from the European Union and/or the United States. And if <a href="/article/syria-kurdish-attack-risks-triggering-new-turkish-offensive">Russian</a> and Turkish forces clash and there are significant casualties on either side in Syria, the military confrontation could spread to other theaters where Turkey and Russia back opposing sides, like Ukraine and the Caucasus.&nbsp;</p><h3>Still-Broken Lebanese Elections</h3><p>Spring 2022 elections will not significantly change Lebanon&#39;s political status quo, leaving its economic and social crises unaddressed and increasing the risks of sectarian conflict and humanitarian crisis. Without constitutional and electoral restructuring ahead of the elections, established parties like the Sunni Future Movement, the Christian Free Patriotic Movement, and the Shiite party and militant group Hezbollah are likely to emerge from the vote with similar numbers of seats in parliament given the gerrymandering of the sectarian system. As a result, post-election government formation is likely to be slow and the future prime minister is unlikely to implement significant economic and political change. This will leave the country&#39;s core economic and social crises mostly unaddressed, though Lebanon will continue to receive foreign aid to prevent a full-scale humanitarian crisis. With worsening economic and social conditions, <a href="/article/iraqi-and-lebanese-protesters-will-struggle-change-systems-built-resist-sectarian-patronage">anti-establishment anger </a>will increase and will give rise to occasional violent clashes between sects as protesters attempt to pressure the Lebanese state to hold corrupt parties and officials accountable while sectarian militias and parties pressure the state to do the opposite.&nbsp;</p><h3>Diplomatic Conflict Deepens in North Africa</h3><p>The conflict between Morocco and Algeria will worsen, resulting in a greater risk of military <a href="/article/western-sahara-cusp-another-conflict">skirmishes</a> along the border and preventing deeper North Africa integration on shared issues of concern like the chaotic Libyan and Tunisian political situations. The Algerian government is likely to stoke the <a href="/article/risks-algeria-and-morocco-s-latest-diplomatic-row-over-western-sahara">diplomatic conflict</a> to distract from domestic economic problems, while Morocco will continue trying to impose its view of the Western Sahara dispute, prompting political attacks by the Algeria-backed Polisario front. This will risk escalation to other forms of conflict, including military clashes between Polisario forces and Moroccan military forces, and cyberattacks and disinformation campaigns that create the risk of disruptions for businesses in both countries. The worsening diplomatic conflict will also undermine the prospect of broader North African cooperation on issues such as conflict mediation and counterterrorism. This will be especially clear in Libya, where a chaotic pre- and post-election environment will stoke the risk of renewed civil conflict, and in Tunisia, where a constitutional referendum and new elections could restructure the Tunisian political system. Despite Morocco and Algeria both fearing the risk of fresh Libyan civil conflict strengthening transnational terrorist groups or the risk of Tunisian political instability inspiring destabilizing anti-government protests on their own territory, Rabat and Algiers&#39; diplomatic dispute will be a barrier to a joint approach to these issues.</p>

<h3>In the Arab Gulf, Political Cooperation Improves Amid Growing Economic Competition</h3><p>Intra-Gulf Cooperation Council political relations will <a href="/article/iraq-s-summit-shows-promise-improved-gcc-cooperation">continue to improve</a>, but economic competition will deepen, creating uncertainty for foreign investors and shifts to the social contract between governments and Gulf state citizens. The oil-rich Arab Gulf state economies, particularly the United Arab Emirates, Saudi Arabia and Qatar, will take advantage of high energy prices at the beginning of 2022 to aggressively fund their economic diversification programs. To improve their attractiveness vis-a-vis each other to compete for the best foreign investment and labor talent, these states will all introduce new tax, visa and citizenship reforms. While this competitive dynamic will largely benefit domestic and foreign investors, it will <a href="/article/inevitable-unraveling-saudi-uae-ties">lead to some volatility</a> in the regulatory environment as well as <a href="/article/what-greater-gcc-citizenship-means-arab-gulf-s-stateless-residents">uncertainty</a> for Gulf Cooperation Council state citizens who can expect changes in how the government guarantees jobs for nationals. As the political tension between previously feuding GCC states subsides, more unified policies on strategic regional issues will emerge. These issues will include the search for a pragmatic response to Turkish and Iranian influence and how to grapple with the emerging U.S. imperative to drawdown its military presence in the region.&nbsp;</p><h3>Iraq&rsquo;s New Government Will Face Old Economic and Security Challenges</h3><p>Iraqis will likely form another <a href="/article/iraq-s-parliamentary-vote-reflects-disillusioned-electorate">Shiite-dominated government</a>, ensuring political continuity. But the country will face severe security and economic challenges that will limit its room for action and ensure continued dependence on the United States, limiting Washington&#39;s ability to withdraw from the theater. A new Iraqi government will form in the year that looks similar in sectarian makeup to its predecessor, and that will be similarly limited in its ability to solve the structural economic issues that foment the country&#39;s chronic jihadist, tribal and sectarian militancy threats. Driven by its own prerogative to counter China and stop spending so many military resources in the Middle East, the United States will likely withdraw or reorganize some forces from Iraq, but the enduring need for strong military pressure against jihadist militancy will ensure continued U.S. military force presence in Iraq. This in turn will aggravate the <a href="/article/what-assassination-attempt-al-khadimi-means-iraq-s-stability">existing tension</a> between the federal government in Baghdad, which wants some U.S. security support, and the Iran-backed militia forces, who demand a full withdrawal of the U.S. from Iraq and will keep conducting violent attacks and using political intimidation to send the message. It will also guarantee that the United States will continue to spend resources in Iraq, and that the controversial subject of military deployments in the Middle East will remain an issue in 2022 U.S. midterm elections.&nbsp;</p>

<p><strong>Jan. 1: </strong>United Arab Emirates assumes a nonpermanent U.N. Security Council seat.<br /><strong>March: </strong>Arab League summit in Algeria.<br /><strong>March 27: </strong>Lebanese general election.<br /><strong>December: </strong>Qatar World Cup.<br /><strong>December: </strong>Gulf Cooperation Council Leadership summit.<br />&nbsp;</p>

Eurasia

<h3>Elevated Tensions Persist in Eastern Ukraine&nbsp;</h3><p>Disputes over the Minsk agreements and Russia&#39;s demands for security guarantees will keep tensions in eastern Ukraine elevated, but a Russian invasion will not materialize. Seeing a credible military threat against Ukraine as <a href="/article/obstacles-us-and-ukraine-s-strategic-partnership">leverage against the United States</a> and the critical lever slowing its declining influence over Kyiv, Russia will <a href="/article/reassessing-risk-escalation-east-ukraine">maintain its buildup of forces</a>, infrastructure and equipment near Ukraine&#39;s borders to pressure the West to make concessions in European security talks. While the United States will hold talks with Russia, NATO will not formally disavow the prospect of Ukraine&#39;s membership in the alliance. But discussions on certain weapons systems and incident avoidance and management measures will dissuade Russia from a new intervention in Ukraine. Russia will push Kyiv to enact the Minsk Protocol on its terms, and Western leaders will reassure Russia that the Minsk agreements should be enforced. But Kyiv&#39;s opposition and the separatists&#39; intransigence will make real change on the ground unlikely. Moscow will likely authorize the separatists to maintain regular cease-fire violations to put Kyiv in a bind, with both its action and inaction creating political and military risks. If the Ukrainian military <a href="/article/eastern-ukraines-frozen-conflict-turning-hot">responds forcefully to separatist shelling</a>, Moscow can portray Kyiv as the aggressor and justify Russian intervention, but if Ukraine does not step up its countershelling, the Ukrainian military will suffer disproportionate casualties &mdash; something politically damaging for the Zelensky administration. In a low probability, high impact alternate scenario, Russia&#39;s buildup could prompt additional Western military and other support for Kyiv while security talks fail, which would convince Moscow to conduct a military incursion against Ukraine. Such a scenario could include an attempt to seize and occupy large pieces of Ukraine, or involve a limited incursion or targeted missile strikes on the Ukrainian military intended to force a political settlement.&nbsp;<br />&nbsp;</p>

<h3>U.S.-Russia Dialogue Continues</h3><p>A significant improvement in U.S.-Russia bilateral relations will remain elusive in 2022, meaning the possibility for flare-ups and escalatory retaliation will remain. Periodic contacts between the U.S. and Russian presidents will continue as the Biden administration believes that making itself available for dialogue will help dissuade the Kremlin from escalation in Ukraine or <a href="https://worldview.stratfor.com/article/russia-exploits-europe-s-gas-crisis-likely-its-own-detriment">other areas of competition</a>, while Moscow will seek to incentivize the approach of dialogue rather than sanctions on Russia. This will make a modest increase in cooperation on cybersecurity possible amid the negotiations, for example through selective information sharing on cybercriminals and an understanding (though not all Russian cyber actors may adhere to one) barring cyber operations aimed at certain critical systems. But major breakthroughs in the form of written agreements in the U.S.-Russia strategic stability working groups on arms control and <a href="https://worldview.stratfor.com/article/cyber-diplomacy-arrives-another-fork-road">cybersecurity governance</a> will not materialize due to fundamental disagreements. In arms control, the U.S. insistence on creating a framework that could eventually include other nations such as China and the European regional security dialogue around Ukraine will complicate negotiations. A limited agreement seeking to temporarily avoid further <a href="https://worldview.stratfor.com/article/ending-its-nato-mission-russia-seeks-strain-us-europe-ties">diplomatic expulsions</a> is likely, but a comprehensive agreement significantly restoring each country&#39;s diplomatic presence is unlikely, meaning that consular and diplomatic functions at the remaining facilities will remain limited and at risk. The Biden administration will likely push for such an agreement in hopes that renewed diplomatic ties will encourage a more stable relationship with Russia that could allow the United States to focus its foreign policy on containing a rising China. But as the two sides&#39; diplomatic missions in each other&#39;s countries remain extremely limited, both would have to resort to tougher, more asymmetric measures should a major flare-up arise.</p><h3>Economic Pressure Weighs on Minsk&nbsp;</h3><p>Western sanctions will constrain the Belarusian economy, forcing the country to further align its foreign and domestic policies with Russia. The United States and European Union will likely continue to enact new economic sanctions in 2022, but <a href="https://worldview.stratfor.com/article/eu-belarus-cooperation-border-unlikely-yield-broader-rapprochement">Minsk will not take any meaningful steps to de-escalate tensions</a>. At the same time, Belarus will feel the impact of the EU&#39;s five packages of sanctions and the U.S. sanctions on key Belarusian state enterprises more acutely than previous sanctions because they prohibit new agreements with targeted enterprises, not previously concluded contracts, many of which expired in 2021. A struggling economy will push Minsk to seek additional economic support from Russia, including new loans. In exchange, Russia will demand a greater say in Belarus&#39; domestic and foreign policies, and Minsk will increasingly <a href="https://worldview.stratfor.com/article/new-integration-pact-russia-cements-its-grip-belarus">struggle to defend its sovereignty vis-a-vis Moscow</a>. Against this backdrop, Minsk and Moscow will likely conclude agreements coordinating their monetary policy and unifying their gas market by the end of the year. President Alexander Lukashenko will make a trip to Crimea that will confirm <a href="https://worldview.stratfor.com/article/belarus-changing-tone-crimea-portends-stronger-russian-backing-and-strained-ukrainian-ties">Minsk&#39;s foreign policy alignment with Moscow</a>, making a rapprochement with the West even more difficult. Belarus will also coordinate with Russia on constitutional changes, scheduled for a referendum in February, and other structural changes that will not portend a legitimate political liberalization. The lack of significant improvement in the political and business climate will lead to a decline in Western investment and push foreign companies to scale down their operations.&nbsp;</p><h3>Central Asia Adjusts to the Taliban&nbsp;</h3><p>Threats to security and stability in Central Asia and the rise of the Taliban will lead the states to continue their largely conciliatory stance toward Kabul. Concerns over drought, electricity shortages, a slow economic recovery and the continued spread of COVID-19 due to high vaccine hesitancy will push Central Asian governments to seek improved ties with the Taliban government in Afghanistan out of fear that the humanitarian crisis in the country could exacerbate their own social and economic problems and <a href="https://worldview.stratfor.com/article/what-talibans-new-government-means-afghanistans-place-world">make them targets for groups sympathetic to the Taliban</a>. The threat of refugee flows from Afghanistan and their possible infiltration by extremists will also prompt the Central Asian governments to avoid confrontation with the Taliban despite their deep ideological disagreements. Tajikistan, the country most opposed to the Taliban leadership, will increasingly rely on Russian and Chinese support to deter incursion or destabilization by Taliban-aligned groups or provocations by the Taliban. The threat of extremist destabilization efforts may also prompt other states in the region to seek formal agreements to expand their security and economic relations with Moscow and Beijing, suggesting an <a href="https://worldview.stratfor.com/article/taliban-takeover-ripples-across-cyberspace-regional-powers-vie-influence">increase in strategic competition between the two</a> is on the way. Separately, despite the increased threat to domestic stability due to tensions on its southern border, Uzbekistan will not rejoin the Russian-led Collective Security Treaty Organization security alliance it left in 2012, in part due to concerns about losing strategic autonomy amid deepening ties with China. Russia will continue accepting large numbers of migrant laborers from the region despite the increased security concerns over such migration amid the rise of the Taliban as part of Moscow&#39;s strategy to combat extremist sentiments in Central Asia by allowing many of those who would be otherwise vulnerable to radicalization efforts amid low wages and unemployment to leave.&nbsp;</p>

<p><strong>February: </strong>Belarusian referendum on constitutional changes.<br /><strong>Mar. 27:</strong> Local elections in Ukraine.&nbsp;<br /><strong>April: </strong>Russia to publish preliminary census results.<br /><strong>June: </strong>Ukraine&#39;s IMF stand-by arrangement scheduled to expire.&nbsp;<br /><strong>Sep. 11: </strong>Regional and local elections in Russia.&nbsp;<br /><strong>Dec. 8:</strong>&nbsp;Uzbekistan to finalize constitutional changes.</p><p><br />&nbsp;</p>

<h3>Economy Bears Brunt of Brazil&#39;s Election Battle</h3><p>Brazil&#39;s presidential election will increase uncertainty about the direction of the economy as right-wing and left-wing forces compete for power. Ahead of the election, the government will increase welfare spending, worsening the fiscal deficit and increasing inflation. Brazil&#39;s electorate is becoming more and more critical of the government&#39;s <a href="/article/south-america-s-response-p1-covid-19-threat">handling of the COVID-19 pandemic</a> and poor economic conditions, spurring calls for a larger social safety net and opening the door to a victory by the opposition. The main contenders in the October election will be former left-wing President Luis Inacio Lula da Silva and the incumbent, the right-wing President Jair Bolsonaro. To boost his appeal, Bolsonaro is likely to increase a monthly cash-transfer program for low income households and subsidize fuel prices. Temporarily <a href="/article/spending-and-rate-hikes-risk-bogging-down-brazil-s-economy">increasing domestic spending</a> would worsen inflation, increase Brazil&#39;s fiscal deficit and threaten long-term growth. Poor economic conditions and election tensions will push unions and activists to stage periodic disruptive strikes and demonstrations, worsening the business climate in the country. In the lead-up to the election, Brazil will see a clash between the executive and the legislative branches &mdash; over the voting system, so-called fake news legislation and investigations against Bolsonaro &mdash; as each tries to shape the election. Should Lula win, Bolsonaro will likely contest the election results, which would worsen tensions between the judicial sector and electoral institutions. Should Bolsonaro win reelection, left-wing groups would be highly likely to stage significant demonstrations.&nbsp;</p>

<h3>Political Polarization Halts Mexico&#39;s Energy Reforms</h3><p>While the Mexican government is likely to pass energy reform to increase the state&#39;s presence in key sectors such as lithium, pressure from the pro-business opposition is likely to water down parts of it. Even with a mild reform package, the debate could discourage foreign investment because of rising uncertainty about the future of Mexico&#39;s energy sector. The governing National Regeneration Movement will push to give the Federal Electricity Commission, a state-owned energy company, a 54% market share of the energy grid and nationalize the country&#39;s lithium sector while the Va por Mexico opposition coalition will defend more business-friendly reforms. As <a href="/article/mexicos-lopez-obrador-loses-ground-midterm-congressional-election">neither coalition has a two-thirds</a> congressional majority necessary to pass constitutional reform, they will need either to reach a compromise or fail to pass any reform. While opposition lawmakers will resist increasing the public sector&#39;s market share of the energy grid, they will be more willing to nationalize or carve out a market share for the state in the lithium sector because of its central role in the global energy transition. While the legislation is unlikely to be retroactive, it will discourage foreign direct investment in Mexico&#39;s renewable energy sector for fear of further state encroachment. Greater state involvement in the lithium sector would hinder Mexico&#39;s ability to take advantage of the global energy transition, as the state does not have the financial ability or knowledge to start up significant lithium mining operations. The Mexican government will also continue to make investments in the oil and gas sector more difficult for foreign companies and prioritize Petroleos Mexicanos and other state-owned enterprises over foreign competitors, but will be constrained by judicial challenges in lieu of an unlikely constitutional reform.</p><h3>Argentina Faces Political Stagnation, Debt Default&nbsp;</h3><p>Argentina&#39;s political gridlock will hinder the implementation of a deficit-reduction plan and will make it hard for the government to reach a debt restructuring deal with the International Monetary Fund, opening the door to another default. Differing political ideologies between the populist government and opposition-heavy legislature &mdash; <a href="/article/argentinas-political-crisis-will-give-populism-boost">plus fierce internal disputes</a> at high levels of the government on economic policy &mdash; will lead to political stagnation. This will make it hard for Argentina to implement an economic plan in 2022 that the IMF and foreign investors will support. Despite its populist rhetoric, Buenos Aires will continue to negotiate to restructure its $45 billion debt with the IMF, $19 billion of which is due during 2022. <a href="/article/midterm-elections-deal-blow-argentina-s-peronist-president">Negotiations will be prolonged</a> as the government will push for a debt rollover with little to no conditionality, something the IMF will almost certainly reject. As a result, Argentina will make payments during the grace period or enter default, further isolating the country from access to international markets. Meanwhile, the legislative branch will block the majority of the executive branch&#39;s policy platform, creating political uncertainty in addition to the country&#39;s ongoing economic problems. Against this backdrop, the business climate will remain negative, with high levels of inflation, tight capital controls and price caps on basic products.&nbsp;<br />&nbsp;</p>

<h3>Venezuela Continues Its Slow Decline&nbsp;</h3><p>While the United States is likely to increase sanctions against the Maduro regime in Venezuela, the government will probably remain in place and make small concessions to a weakening opposition. Opposition leader Juan Guaido&#39;s strategy of using international recognition as a transitional president to generate domestic <a href="/article/venezuela-opposition-talks-prospects-progress-are-low">support has largely failed</a>, and the anti-Maduro camp will continue to struggle, particularly after its defeat in November 2021 regional elections. The crushing weight of existing U.S. sanctions will continue to significantly impact the Venezuelan economy, though informal dollarization from black market sources will allow for a degree of price stability. The U.S. Department of Justice will use ongoing criminal cases to strike a deal with Venezuelan businessmen &mdash; most notably Alex Saab &mdash; in order to gain insider information on the Venezuelan government&#39;s financing, allowing it to implement further sanctions. This will affect the government&#39;s ability to partake in oil smuggling operations and give the United States new leads on sanction-busting efforts. While new targeted sanctions would affect Maduro&#39;s financing, they would be unlikely to eject him from power, and he is likely to maintain his hold over the country&#39;s business elite and military.&nbsp;</p>

<p><strong>Feb. 6: </strong>Costa Rican general election.<br /><strong>March 13: </strong>Colombian legislative election.&nbsp;<br /><strong>April 22: </strong>Second-round vote in Costa Rica&#39;s presidential election.<br /><strong>May 29: </strong>Colombian presidential election.<br /><strong>Nov 8:</strong> U.S. legislative elections.&nbsp;<br /><strong>Oct. 2:</strong> Brazilian general election.<br />&nbsp;</p>

South Asia 

<h3>The Taliban Will Struggle to Bring Stability to Afghanistan</h3><p>The Taliban will face significant economic, social and militant pressure as it attempts to consolidate its control over Afghanistan. The Taliban central leadership will <a href="https://worldview.stratfor.com/article/taliban-s-challenge-legitimacy">struggle to balance domestic and foreign expectations</a> as it shapes new regulations and formalizes a new government and a constitutional structure. The <a href="https://worldview.stratfor.com/article/implications-latest-islamic-state-bombings-kabul">Islamic State Khorasan Province</a> will prove the most immediate domestic threat to it because of its capability to carry out attacks in different cities; the group is likely to expand its operations beyond northeastern Afghanistan into key southern and western cities. Resurgent <a href="https://worldview.stratfor.com/article/pakistan-afghan-taliban-showcase-their-ability-mediate-militants">Tehrik-i-Taliban Pakistan activity in neighboring Pakistan</a> will test Kabul&#39;s relations with Islamabad, its key economic partner and transport corridor to the world. Pakistan and <a href="https://worldview.stratfor.com/article/approaching-taliban-china-will-tread-carefully">China</a> will increase investment and transportation infrastructure in Afghanistan, but the Taliban&#39;s inability to ensure stability and security for foreign workers will limit this. International aid will also remain limited, and any discussion of normalization of Afghanistan&#39;s foreign relations will depend on the outcome of the proposed legal assembly (Loya Jirga) and the structure of a consultative government, as well as Taliban regulations on women&#39;s rights. A failure to effectively balance the interests of ethnic minorities and conservative Pashtun rural tribal members&nbsp;could trigger greater social instability in the cities and expanded anti-government militancy from both Islamist militants and the <a href="https://worldview.stratfor.com/article/what-s-next-afghan-resistance-after-fall-panjshir">nascent National Resistance Front</a>.</p><h3>Political Opportunities and Risks in Pakistan&#39;s Neighborhood</h3><p>Pakistan will use its strategic position to be an intermediary between the West and the Afghan Taliban and to enhance its trade ties with Central Asian countries via Afghanistan. Pakistan&#39;s geopolitical position will allow it to be an intermediary between Afghanistan and the United States and other Western countries, particularly when it comes to facilitating humanitarian aid and modest diplomatic engagement. Pakistan will also seek to exploit its influence with the Taliban to reach economic deals with Central Asian countries that involve Afghanistan, such as moving forward on the Turkmenistan-Afghanistan-Pakistan-India Pipeline (TAPI) project or the Trans-Afghan railway project. Islamabad will also consider covertly permitting U.S. counterterrorism surveillance from Pakistan to improve ties with the White House. Pakistan also <a href="https://worldview.stratfor.com/article/gauging-pakistan-s-position-amid-turmoil-afghanistan">will strive for a stable Afghanistan</a> through humanitarian and economic support because an unstable Afghanistan poses threats of militancy and conflict spillover as well as of renewed wave of refugees fleeing Afghanistan for Pakistan. It will use its influence with the Taliban to <a href="https://worldview.stratfor.com/article/drone-strike-highlights-afghan-taliban-s-challenge-maintaining-pakistani-relations">prevent groups like Tehrik-i-Taliban Pakistan</a> from using Afghanistan as a launch pad for attacks against Pakistani infrastructure and officials.&nbsp;</p><h3>India&#39;s Economic Recovery Will Continue Amid External Vulnerabilities&nbsp;</h3><p>The Indian economy will continue to recover from the pandemic slump, but the risk of a slowdown due to COVID-19 uncertainties and inflation will remain, prompting New Delhi to strengthen its manufacturing sector to mitigate supply chain disruptions. Robust growth in 2022 will place India among the fastest growing countries in the world, with growth rates likely to return to pre-pandemic levels. Greater mobility as a result of the lifting of lockdown restrictions will result in increased demand for goods and services, giving an additional boost to manufacturing activity. Various production-linked government incentive schemes (for example, in the semiconductor sector) will further boost the manufacturing sector. The Indian central bank will likely tighten monetary policy if demand in the economy remains high in order to address inflation. India will also attempt to fast track bilateral trade deals with countries like the United Arab Emirates and Australia to boost exports. Supply-side constraints including higher crude prices (India imports most of its oil) as well as disruptions in global supply chains and new COVID-19 variants could slow economic activity.&nbsp;</p><h3>India Will Face Continued Border Tensions With Pakistan and China</h3><p>India will increase its military presence at its borders with China and Pakistan, opening the door to low-scale confrontations, particularly with China. While tensions will remain high, a significant escalation in military aggression with China is improbable. The risk of militant attacks on the India-Pakistan border will increase, particularly in the Jammu and Kashmir region, because of the arrival <a href="https://worldview.stratfor.com/article/india-taliban-led-afghanistan-marks-painful-setback">of militants</a> from <a href="https://worldview.stratfor.com/article/jihadist-terrorism-after-taliban-takeover-afghanistan">Afghanistan</a>. Pakistan will covertly help these groups to carry out attacks in Indian-administered Kashmir, while Pakistan-based groups will also aid local groups on the Indian side in similar attacks that could exploit the fragile political climate in the region and spread anti-India or anti-federal government sentiment there. The Indian government will respond by strengthening its military capabilities along the border while trying to create a favorable political climate for the ruling Bharatiya Janata Party by gerrymandering. Separately, China&#39;s continued infrastructure development to aid its military in high-altitude border regions with India and evidence of China building small villages in some regions of Arunachal Pradesh in India will keep tensions high between the countries. Because of this increased military presence, and with no signs of de-escalation in sight, a skirmish on either side of the border is possible. Any such incident will deepen the geopolitical rivalry between India and China and will continue to factor in their competition for regional influence, even if New Delhi and Beijing seek to temper their rivalry.</p>

<p><strong>February/March: </strong>Indian state elections in Goa, Manipur, Punjab, Uttar Pradesh and Uttarakhand.<br /><strong>March/April: </strong>Tentative date for a new government in Afghanistan.<br /><strong>July: </strong>Presidential election in India.<br /><strong>November: </strong>Indian state election in Himachal Pradesh.</p>

South Asia

Sub-Saharan Africa

<h3>In South Africa, Modest Economic Reforms Amia Unrest and ANC Infighting</h3><p>The South African government will balance modest economic reforms with welfare spending in a bid to defuse social unrest and manage political fissures. While demonstrations are unlikely to boil over to the degree seen in summer 2020, unrest in response to rifts within the African National Congress and ongoing governance issues, including power outages and poor service delivery, are all but certain. The ANC&#39;s struggles to build alliances with opposition parties following <a href="/article/anc-s-record-electoral-defeat-bodes-ill-south-africa-s-economic-stability">November 2021 municipal elections</a> means the ruling party will struggle to pass significant reforms, including land-ownership and tax reforms. South African President Cyril Ramaphosa will likely pursue selective economic reforms, including a continued crackdown on corruption because this is something that appeals to voters without worsening the economy. But tackling corruption is unlikely to result in improvements to areas of importance to voters, including the provision of public services, the high cost of living and unemployment. Ramaphosa will also pursue the privatization of state-owned enterprises, but this will not extend to the troubled state electricity company, Eskom, in large part due to its massive debt burden and flawed infrastructure, which means that rolling blackouts will continue to undermine the economy throughout 2022. Electricity outages and ongoing poor service delivery are likely to result in <a href="/article/south-african-troops-deployed-amid-violence-over-former-president-s-arrest">flare-ups of social unrest</a>, including protests including walkouts and boycotts, and looting. While the government will likely modify or extend social welfare measures and <a href="/article/omicron-deals-another-blow-south-africa-s-struggling-economy">prioritize vaccination campaigns</a>, these efforts may mitigate, but not completely prevent, social unrest. <a href="/article/south-africa-s-president-tries-consolidate-power-cabinet-reshuffle">ANC infighting</a> will persist throughout the year, with left-wing party opponents of Ramaphosa likely to put forth an opposition candidate for the December 2022 internal ANC elections. What candidates emerge and the formation and dissolution of alliances will shape the likelihood of protests and violence as a result of the ANC infighting.</p><h3>Russia Tries to Step Into the Emerging Void Left by France in the Sahel</h3><p>Russia will attempt to exploit France&#39;s reduced military presence in the Sahel, which will result in shifting alliances with and among Islamist groups. <a href="/article/sahel-french-exit-will-be-easier-said-done">France&#39;s plan</a> to reduce troop numbers in the Sahel beginning February 2022 is prompting Malian officials to turn to Russia to fill the security void. If as alleged the <a href="/article/russian-military-influence-sahel-terrorism-france">Russian paramilitary group known as Wagner has a presence in Mali</a>, this could give rise to confrontations with French forces and the U.N. peacekeeping operation in the region, possibly prompting the French to withdraw from the area entirely. If France decides to focus on counterterrorism missions in the southern Sahel, the subsequent reduction of pressure on regional Islamist groups could give those groups room to take over civilian populations in northern and central Mali and use captured territory as bases to conduct regional attacks. Alliances between Islamist groups are also likely to change as geopolitical influence shifts. Militants from Jamaat Nusrat al-Islam wal-Muslimin, al Qaeda in the Islamic Maghreb and the Islamic State West African Province will likely defect and join competing groups as territorial control shifts, which may cause loose alliances to form between groups, potentially increasing their capacity to mount attacks. A Russian presence will likely permit the Malian government to engage more deeply with Islamist groups like JNIM, which could result in formal negotiations and attempts to demobilize fighters in order to draw them into the Malian state-building project.&nbsp;</p><h3>Whether or not Peace Comes to Ethiopia, Tensions and Humanitarian Crisis Will Persist</h3><p>Even if a resolution to the Ethiopian conflict is reached among political elites, ethnic tensions will deepen and the humanitarian crisis will worsen over the coming year, damaging regional economies. As the conflict between the central government led by Ethiopian Prime Minister Abiy Ahmed and the Tigray People&#39;s Liberation Front (TPLF) and allies <a href="/article/ethiopia-claims-victory-rebels-retreat-north-peace-remains-distant">continues</a>, a protracted conflict followed by a <a href="/article/ethiopia-s-future-stake-tigray-forces-march">negotiated settlement</a> appears to be the most probable outcome. The Ethiopian military has the upper hand entering 2022, with its military successes in late 2021 adding pressure on Abiy to retake the Tigrayan capital of Mekele. Even if this does occur &mdash; and it is by no means certain &mdash; the TPLF is unlikely to suffer a complete defeat and a protracted conflict is likely. In any case, an end to the conflict would not end the ongoing <a href="/article/what-s-stake-ethiopia-barrels-toward-civil-war">humanitarian crisis</a>. The longer that the conflict persists, the risk of spillover to regions so far spared from the war, like southern and eastern regions, increases. Drought, food shortages and worsening ethnic violence will continue to pose problems for Ethiopians and for those in the broader Horn of Africa region. Divisions between ethnic Amharans, Tigrayans, Oromos and others will likely result in spates of violence on community levels. A protracted humanitarian crisis in Ethiopia will have regional implications, including harm to neighboring economies in Somalia, Eritrea and Kenya, as well as damage to ongoing efforts to integrate the economies of Ethiopia, Somalia and Eritrea. Moreover, Sudan may attempt to take advantage of chaos in Ethiopia by attempting to expel Ethiopian farmers from the Fashqa triangle along the Sudan-Ethiopia border, while Egypt may try to exploit Ethiopian weakness by attempting to block its efforts to fill the Grand Ethiopian Renaissance Dam.&nbsp;</p>

<h3>Nigerian Politics Will Worsen Security and Undermine Business Continuity</h3><p>Political calculations ahead of the February 2023 presidential election will increase political uncertainty in Nigeria, which will worsen the security environment and raise risk levels for business continuity. According to Nigeria&#39;s pattern of rotational power between geographic regions, the 2023 presidency should fall to a southerner. Despite the stability this system brings, a multitude of candidates and shifting alliances between the two dominant parties, the All Progressives Congress (APC) and the People&#39;s Democratic Party (PDP), will make for a highly contested and unstable run-up to the election. Candidates from both parties will continue to defect to the other in a bid for political advantage, and will also engage in smear campaigns that will likely make the business environment less predictable as allegations of corruption and fraud come to light across sectors. A worsening security situation in Nigeria&#39;s northern states and the ongoing high threat to oil infrastructure in the country&#39;s south will add social pressure for leadership changes. Politicians will attempt to exploit the weak security environment by allowing bandits and armed groups to operate with impunity, increasing security risks in several states, reducing investor confidence, and compounding Nigeria&#39;s growing problems with debt sustainability. In the final year of his presidential term, President Muhammadu Buhari will likely attempt to boost <a href="/article/coronavirus-coming-nigeria-and-its-economy-covid-outbreak-sub-saharan-africa-oil">revenue generation</a> by <a href="/article/nigeria-s-long-awaited-oil-reforms-may-finally-be-here">removing subsidies on oil</a> and electricity, which will almost certainly be met with consumer protests likely to flare up into violence.</p><h3>A Kenyan Presidential Election Brings Uncertainty</h3><p>In Kenya, a presidential election will bring heightened risk to the business environment as politicians attempt to exploit political uncertainty and voters&#39; economic hardship. In the runup to the August 2022 presidential elections, candidates will woo voters with promises of economic and development benefits as well as cash payments. A key question in determining the outcome of the election is whether the Kikuyu ethnic group, to which President Uhuru Kenyatta belongs and that comprises 22% of the population, will vote as one block or split. Kenyatta currently backs Raila Odinga, a former government minister and five-time presidential candidate. If the vote splits, the odds of victory for William Ruto, Odinga&#39;s political opponent, significantly increase. But if Odinga wins the presidency, the odds of passing proposals related to the <a href="/article/kenyan-court-blocks-government-s-plan-reshape-itself">Building Bridges Initiative</a> (BBI) would be much higher. Authored by Kenyatta and Odinga, BBI is a constitutional amendment aimed at decentralizing power that would create a new prime ministerial post and at least 70 new electoral constituencies. As the <a href="/article/kenya-stage-set-another-tumultuous-election-season">battle for votes continues</a>, disruptions to the business environment are likely, as politicians will attempt to exploit social unrest caused by high commodity prices (especially fuel prices) and drought in the north of the country by pitting voters against political opponents. While Kenya is unlikely to reimpose strict lockdown measures in response to new COVID-19 variants or an uptick in cases, Kenya&#39;s relatively low vaccination rate (5.5% of adults have received two doses) creates risks of ongoing disruptions.&nbsp;</p>

<p><strong>February:</strong> French Operation Barkhane in the Sahel begins its drawdown of troops.&nbsp;<br /><strong>Feb. 17-18:</strong> 2022 European Union - African Union summit in Brussels.&nbsp;<br /><strong>Feb. 27: </strong>Malian presidential election is scheduled, but will likely be postponed.&nbsp;<br /><strong>August:</strong> Angolan presidential election.&nbsp;<br /><strong>Aug. 9: </strong>Kenyan presidential election.&nbsp;<br /><strong>Nov. 13: </strong>Somaliland presidential election.<br />&nbsp;</p>

2022 ANNUAL FORECAST

Americas

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