Political Risk Analysis - Political Uncertainty To Rise Amid Fresh Elections - APR 2018
BMI View: The dissolving of parliament and calling of fresh elections by President Francisco Guterres will likely lead to a rise in political uncertainty in Timor-Leste and we are downgrading our short-term political risk score to 52.9 from 54.6 previously. We maintain our 2018 real GDP growth forecast at 5.8% as higher oil prices and ongoing infrastructure projects provide support, but note that the stalling of the passing of the 2018 budget presents downside risks to long-term economic development.
Timor-Leste's President Francisco 'Lu Olo' Guterres dissolved parliament and called for fresh elections in late January in an attempt to break the political stalemate that has existed since late 2017 over the passing of the government's economic programmes and the associated 2018 budget. We expect this to lead to a rise in political uncertainty and are downgrading our short-term political risk score to 52.9 from 54.6 previously. With the minority government headed by Fretilin struggling to govern and the opposition National Congress for Timorese Reconstruction (CNRT) being accused of actively stymieing the political process, we believe that fresh elections could see smaller opposition parties such as the People's Liberation Party (PLP) gain a greater share of parliamentary seats. We believe that the political impact on growth is likely to be limited for now. Higher oil prices and ongoing infrastructural projects are likely to support economic growth, informing our 2018 real GDP forecast of 5.8%. However, the stalling of the passing of the 2018 budget presents downside risks to long-term growth.
Fresh Elections Aimed At Breaking Political Deadlock