The UK government is unlikely to grant a second Scottish independence referendum. China’s antitrust crackdown appears to continue. Colombia’s president has withdrawn a proposed tax reform. Meanwhile, Malaysia and Thailandmight introduce new restrictions to fight Covid-19, the Polish parliament is expected to approve the EU’s Own Resources decision, Brazil’ssenate investigation into the government’s handling of the pandemic begins, and labor relations will gain attention in South Africa.
CHART OF THE WEEK
Recent public opinion data in the US, the UK, France, and Germany show that large majorities of citizens demand a bigger role of government in a wide range of policy areas. Between 70% and 80% of citizens believe that raising taxes on the wealthy and increasing spending on low-income earners is very important or somewhat important. Policies such as building more public housing and providing more vocational training for workers are also widely popular, while a universal basic income is more popular in Europe than in the US. Most significantly, a large share of voters in these four countries believe that their country’s economic system requires reform. This is not only observed among left-wing voters, but also – even if more moderately – among significant parts of right-wing electorates. This emerging consensus suggests that businesses will face an uncertain regulatory landscape in the post-pandemic world across advanced economies, regardless of the ideology of the ruling government.
WHAT TO WATCH
Ahead of the 6 May regional elections, the Scottish Nationalists (SNP) remain comfortably ahead. They will remain in government with an anticipated 60-70 seats in the 129-seat parliament. The signpost to watch is whether the SNP will get the 65 seats required for an overall majority or whether they will have to rely on the Greens to provide an overall majority in favor of a second independence referendum. After the vote, PM Boris Johnson is likely to declare that ‘now is not the time’ for a second referendum, irrespective of the Scottish election result. In this way, Johnson will attempt to kick the can down the road until the end of this UK parliamentary term in late 2024.
The State Administration of Market Regulation, China’s anti-monopoly regulator, is reportedly preparing to fine Tencent at least RMB 10bn. This would come after last month’s RMB 18bn (USD 2.8bn) fine on Alibaba. The agency has also announced a formal investigation of food delivery and group buying platform Meituan.
The coming days will be a crucial test of whether President Ivan Duque can muster any support in Congress for some limited tax reforms. Duque withdrew the original USD 6.4bn package on 2 May; the announcement was followed by the resignation of Finance Minister Alberto Carrasquilla. This follows days of strikes and protests. Last week’s publication of poverty statistics for 2020 underline how difficult any tax reforms will be to pass: 3.6mn people have fallen into poverty as a result of the pandemic, leaving the poverty rate at 42.5%. Recall too that social pressures pre-date the Covid-19 crisis. In this context, no legislator will be keen to back tax rises so close to the congressional elections scheduled for March 2022. The threat of a ratings downgrade therefore continues.
ON THE HORIZON
Rising Covid-19 case numbers in Malaysia and Thailand could result in tighter restrictions this week.Cambodia and Laos have been implementing lockdowns the past two weeks but may ease some of them in the next few days. Land borders are likely to be policed even tighter to avoid international transmission.
The country is heading towards an early parliamentary election in July. On 5 May, President Rumen Radev will give the center-left Bulgarian Socialist Party (BSP) a final chance to form a government; this party, however, is expected to immediately return the mandate to the president. In this situation, the country’s constitution forces the president to appoint a caretaker government, dissolve the parliament, and schedule a new general election within two months. While a new parliamentary vote in the summer would likely benefit opposition parties, another fragmented parliament and a challenging government formation process could be expected.
The lower house of parliament is expected to ratify on 4 May the European Union’s Own Resources Decision. This will allow the bloc to issue bonds to finance the post-pandemic recovery fund, but it also entails the controversial rule-of-law mechanism. The ruling Law and Justice (PiS) party managed to secure the support for the ratification from The Left, an opposition party, after the PiS’s junior coalition partner United Poland refused to back the bill. The unlikely cooperation between the right-wing PiS and a more liberal party (The Left) reveals cracks both within the ruling United Right coalition and the opposition.
The Senate parliamentary inquiry (CPI) on the handling of the Covid-19 pandemic begins on 4 May. This will start with the presence of Bolsonaro’s first health minister, Luiz Henrique Mandetta, who left the government publicly abhorring his boss’s denialism last year. Since then, he has been elevated to potential presidential contender. This comes at a time when Brazil has surpassed 400,000 deaths from the coronavirus pandemic and only 15% of the population has received a first dose of the Covid-19 vaccine while 7.5% are fully vaccinated with two doses. The CPI is expected to expose the Bolsonaro administration’s mishandling of the pandemic and thus weaken the government’s capacity to lead a consistent agenda in Congress. Reforms, including on taxation, have thus become unfeasible for the remainder of the current mandate (until 2022), which does not exclude initiatives that might at least simplify Brazil’s complex tax regime.
MIDDLE EAST AND AFRICA
Labor relations will be in focus. At public power utility Eskom, wage negotiations kick off on 4 May. On 5 May, the Public Service Co-ordinating Bargaining Council (PSCBC) will decide whether there is a wage dispute between the government and public-sector trade unions. If a dispute is declared, a legally mandated conciliation process ensues. The stakes are the highest in decades as Finance Minister Tito Mboweni has pledged to deliver more than ZAR 300bn in savings via a wage freeze over three years. While the unions are relatively weak, the odds of a public-sector strike are rising.