Teneo’s global team of experts joined Kevin Kajiwara for an important discussion on critical issues to watch in key regions around the world in 2022. We were pleased to be joined by Jon B. Alterman, Teneo Senior Advisor and Director of the Middle East Program at the Center for Strategic and International Studies (CSIS); Antonio Barroso, Teneo Managing Director and expert on Europe; Anne Frühauf, Teneo Managing Director and expert on Southern Africa; Bob Herrera-Lim, Teneo Managing Director and expert on Southeast Asia; Nicholas Watson, Teneo Managing Director and expert on Spanish-speaking Latin America; and Gabriel Wildau, Teneo Senior Vice President and expert on China.
China
The Communist Party of China (CPC) will convene their 20th National Congress in Beijing in the second half of 2022. While Xi Jinping will likely be victorious in his leadership campaign, reports from China’s Sixth Plenum last month show significant constraints on Xi’s power within the party to shape internal party dynamics, appoint party personnel and execute controversial policy changes.
China’s policy outlook is at a crossroads with the economy. The economy is slowing and traditionally, during political transition years, leadership ramps up stimulus to create a positive economic background in an attempt to consolidate power. However, China needs to strike a balance between boosting short-term growth to strengthen President Xi’s position and driving medium to long-term structural reform by reining in its debt-ridden property market.
Broad decoupling between the US and Chinese economies is off the table with selective decoupling likely to continue into 2022. However, despite glimmers of modest tariff reductions, China is still seeking to reduce dependence on the US while increasing the rest of the world’s dependence on China. We are not likely to see significant compromises between the US and China in the new year; however, the Biden-Xi summit highlighted the desire for cooperation.
Africa
The new coronavirus variant Omicron that has now become dominant in South Africa represents another downside for the country’s economic outlook and has raised concerns about global vaccine inequity. Around 10% of the population in Africa are fully-or partially-vaccinated, and there are huge disparities across the country which will have severe consequences for Africa’s economic recovery.
There are key African elections to watch in 2022 and beyond. Kenya will elect a new president in August 2022 following Uhura Kenyatta’s two-term presidency. This transition will likely spark disruptive political violence which will impact the Kenyan economy. South Africa is heading into the ANC internal elective conference at the end of 2022, which will decide whether Cyril Ramaphosa will be a two-term president. Additionally, elections will dominate the political agenda in Nigeria ahead of the February 2023 election.
A new arc of instability is emerging from west to east across the Sahel creating national security issues which are threatening political stability. Over the course of this year, Africa has experienced six coups, and Ethiopia is facing an existential crisis as the country’s civil war shows no signs of abating.
Middle East
The energy transition is fueling volatility in the oil market and forcing governments in the region to diversify their economies in order to build resilience and reduce vulnerabilities. It is likely that a surge in oil prices will accelerate the transition to low carbon energy which, in turn, will drive down oil prices. However, reduced oil exploration will again lead to an increase in oil prices, creating a tremendously cyclical market and an extremely difficult planning environment.
As the US continues to disengage from the Middle East, it risks giving China and Russia a chance to fill the gap and expand their influence. It is critical that the Biden administration reestablishes and communicates boundaries in the relationships with the Middle East that were deeply unbalanced by the Trump administration.
The US and European officials are left feeling pessimistic following the latest round of talks to resurrect the Iran nuclear deal in Vienna last week. It could be argued that the Iranians are trying to create a sense of crisis among other countries in a bid to expedite a deal on their terms.
Europe
France will vote to elect a new president in April 2022, and Marine Le Pen remains the favorite to face the centrist incumbent, Emmanuel Macron, in a repeat of the 2017 election. However, Le Pen’s radical views could steer a path to victory for Macron. Other candidates likely to challenge President Macron next year include Valérie Pécresse from Les Républicains conservative right-wing party and far right pundit Eric Zemmour.
Europe is seeking to achieve a ‘new normal’ relationship with China to prevent any further regression following sanctions on both Chinese and EU officials which led to the suspension of the Comprehensive Agreement on Investment (CAI).
Western officials are concerned that Russia could invade its ex-Soviet neighbor Ukraine. Despite an invasion likely triggering immediate sanctions from the US and the EU, Putin will continue to create chaos to fuel instability in Europe going into 2022 and beyond.
Latin America
Brazil’s electoral equation is a highly polarized contest between Lula, representing the left, and Bolsonaro, representing the right. Bolsonaro will face stiff challenges in his attempt to secure a second term in office given the bleak economic outlook with double digit inflation levels and a forecasted recession.
Mexico’s president Andrés Manuel López Obrador is promoting a recall referendum against himself in a bid to reboot his presidency with fresh momentum and authority as he heads into his second term.
The Constituent Assembly has been in session in Chile since July, drawing up a new constitution which will be approved or rejected by the public. This is happening in parallel to the presidential election which is another highly polarized contest between the right and the left.
Meanwhile, time is running out for Argentina who owe the IMF $1.9 billion on December 22nd.
Southeast Asia
The outcome of the 2022 South Korean presidential election, which is scheduled to be held in March 2022, will have significant consequences for the trajectory of US, QUAD and Japan relations. In 2022, Southeast Asians will go to the polls in other important countries. Most notably, the Philippines will hold a presidential election in May 2022, the result of which could affect the US’ commitment to defend the Philippines’ armed forces from attack in the South China Sea. The Communal elections will be held in Cambodia in June 2022.
Meanwhile, unrest continues in Myanmar over the country’s ruthless military which seized power in a coup d’état in February 2021. The future of Myanmar is still unknown, but Russia and China’s potential interest in seeking deeper ties with Myanmar could leave the country entangled in ongoing geopolitical tension.
While vaccine hesitation is low in Southeast Asia, the challenge lies in promoting and maintaining public confidence in healthcare and upholding a reasonable price for healthcare treatment. This has been the source of ongoing disruptions in Vietnam over the past three months.