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Election year for emerging markets: What to expect

It's election year for major emerging market economies from India to Brazil.

The so-called 'Fragile Five' – India, Indonesia, Brazil, South Africa and Turkey – all hold elections in the months ahead, with corruption just one theme expected to be feature highly.

Turkey held local elections last weekend and this weekend, India – the world's largest democracy – goes to the polls.

Here's a run-down of what to expect in five key emerging markets.

BJP prime ministerial candidate Narendra Modi arrives in helicopter during Bharat Vijay Rally.
Rohit Umrao | Hindustan Times | Getty Images
BJP prime ministerial candidate Narendra Modi arrives in helicopter during Bharat Vijay Rally.

India

Election due: National elections set for April 7.

Backdrop: India's stock market has rallied sharply on hopes that the elections will spur reforms. India, Asia's third biggest economy and the world's largest democracy, was one of the hardest hit emerging markets last year. Its currency has rebounded in recent weeks as well, after slumping to a record low last August as investors punished the country for not doing more to tackle a wide current-account deficit, address a sluggish economy and implement structural reforms.

Key election themes: Consumer inflation, running at an annual rate around 8 percent, and rampant corruption.

Read MoreWorld's biggest election: Game changer for India?

Expected outcome: Opinion polls suggest the ruling Congress party is heading for defeat at the hands of the opposition Bharatiya Janata Party's (BJP).

The wild card: The anti-corruption Aam Aadami Party has shaken things up, winning the hearts and minds of an electorate dismayed with corruption. The party made a spectacular debut in Delhi state elections at the end of last year, winning 28 of the 70 seats up for grabs. Whether it can replicate that success across the country now remains to be seen.

View from the experts: "A lot of the good news is priced in, in terms of the election," said Rob Aspin, head of equity investment strategy at Standard Chartered's wealth management group. "The election results may disappoint as the hard work then begins."

Supporters of the ruling Justice and Development Party (AKP) celebrate the results of local elections in Istanbul on March 30, 2014.
MIRA | AFP| Getty Images
Supporters of the ruling Justice and Development Party (AKP) celebrate the results of local elections in Istanbul on March 30, 2014.

Turkey

Election due: Local elections took place on March 30; presidential elections set for August. Parliamentary elections due in 2015.

Backdrop: Prime Minister Tayyip Erdogan's AK Party (AKP) emerged from local elections at the weekend with a strong showing, retaining control of the two biggest cities Istanbul and Ankara. Erdogan, who has been in power since 2003, has been hit by a high-level bribery and corruption scandal involving government allies that sparked street protests late last year. Turkish stocks and the lira both rose sharply after the local election results.

Key election themes: Corruption, inflation.

Read MoreIs Turkey a safe bet after Erdogan poll win?

Expected outcome: Erdogan has dominated Turkish politics for more than a decade and won credibility for delivering economic stability. A survey by SONAR research, one of Turkey's main pollsters, in January put support for the AK Party at 42.3 percent, two percentage points below its last poll in August 2013 and below the 50 percent won by the AK in the 2011 election, Reuters reported. While a corruption scandal has hurt the party's popularity, it remains comfortably above the opposition in opinion polls.

The wild card: Erdogan has made no secret of his wish to run as a presidential candidate in the August vote, but corruption allegations and last year's street protests means it may be difficult to secure a majority in the first round of voting, analysts say.

View from the experts: "From a market perspective, the (local) election result appears to be more or less what the doctor ordered: a solid win for the AKP which shores up the position of Turkey's ruling party and averts the threat of a snap parliamentary election," said Nicholas Spiro, managing director at Spiro Sovereign Strategy. "Yet any sense of relief on the part of markets needs to be tempered by the realization that the election has thrown the bitter political divisions in Turkish society into even sharper relief."

Indonesia

Election due: Elections for a new parliament are expected to take place on April 9, followed in July by a presidential election. If there is no clear winner in the first round of voting in the presidential election, a second round is expected to take place in September.

Backdrop: Like its emerging market peers, Indonesia has come under pressure from an unwinding of U.S. monetary stimulus that has exposed economic weaknesses such as a wide current-account deficit. The central bank has hiked rates five times since the middle of last year to prop up a crumbling currency. While the economy, the biggest in Southeast Asia, grew a better-than-expected 5.72 percent on year in the fourth quarter, economists say political uncertainty, the impact of monetary tightening and a controversial mineral export ban will all be headwinds in the coming months.

Read MoreIndia and Indonesia: Not so bad after all

Key election themes: Endemic corruption, poor infrastructure, under investment in health and education.

Expected outcome: Analysts say it's unlikely that any one party will win an outright parliamentary majority. The best case scenario for markets, they say, is one in which a big party wins a sizeable chunk of seats that enables it to form a coalition with one or two other parties. The country's main political parties include President Susilo Bambang Yudhoyono's Partai Demokrat and the opposition Democratic Party-Struggle run by former President Megawati Sukarnoputri.

Last month the main opposition named popular Jakarta governor Joko Widodo, known as Jokowi, as its candidate for the presidential election. He is viewed as a favorite to win.

The wild card: Watch the youth vote. Of the projected 187 million eligible voters in this year's elections, over a third will be between the age of 16 and 20. Indonesia's politicians face a young electorate that is increasingly online and this could well shape the political landscape in the years ahead, analysts say.

View from the experts: "The political picture is now clearer with Joko Widodo officially in the Presidential race," analysts at Mizuho Corporate Bank said in a note. "Jokowi incarnates change and is perceived as the person who will be able to push through critical reforms in areas where his predecessors were mostly unsuccessful."

South Africa

Election due: General election scheduled for May 7.

Backdrop: South Africa's economy grew 1.9 percent last year and analysts say forecasts for growth of 2.8 percent this year are under threat from strikes and mines and factories that are hurting the economy. The country's currency, the rand has recovered a bit of ground since weakening to a five-year low against the dollar in January but remains down almost 2 percent from where it ended 2013. Sticky inflation, which rose to 5.8 percent in January from a year earlier, also remains a concern.

Key election themes: Unemployment running at about 24 percent, poor infrastructure, labor unrest, a weak economy and corruption.

Expected outcome: The African National Congress (ANC) is expected to extend its 20-year hold on power but with a reduced minority in the 400-seat parliament amid corruption scandals and civil unrest. The ANC has won each of the last four elections by a landslide, winning more than 60 percent of the popular vote. The Democratic Alliance is the official opposition and currently holds 67 seats to the ANC's 264.

Read MoreDollar the root our currency crisis: South Africa President

The wild card: According to the Council on Foreign Relations (CFR), a think tank, the Economic Freedom Fighters (EEF), founded by former head of the ANC's youth wing Julius Malema is something to watch. The EEF favors wholesale nationalization of land and industry and appeals directly to the poor in townships and rural areas. Some analysts say the EEF could win as much as 10 percent of the vote – a development that would be an "earthquake," the CFR said.

View from the experts: "Conventional wisdom is that this will be the most competitive election in the country's post-apartheid history," analysts at CFR wrote in January. "Should the ANC's share of parliamentary seats fall below 60 percent, there likely will be a strong move to replace [President Jacob] Zuma as party leader–and as chief of state. However, it is difficult to imagine that the ANC will 'lose' its majority in parliament."

Brazilian President Dilma Roussef
Getty Images
Brazilian President Dilma Roussef

Brazil

Election due: Elections for a new president and parliament are expected on October 5.

Backdrop: Brazil, the biggest economy in Latin America, faces an uncertain election year. Its stock market, down almost seven percent so far this year, has been battered by Federal Reserve tapering fears. A severe drought is stretching the country's finances, the central bank has hiked interest rates by 350 basis points since April last year to contain inflation and last year a small demonstration against a 50-cent rise in bus fares exploded into the biggest street protest Brazil has witnessed in years.

Last week Standard & Poor's (S&P) downgraded Brazil's long-term debt rating to BBB minus, one notch above "junk" status.

Key election themes: Poor public services, rising living costs and deteriorating public finances and corruption.

Read MoreBrazil flirts with junk status – what happened?

Expected outcome: President Dilma Rousseff from the Workers' Party is running for re-election and despite the weak economic backdrop she is the favorite to win. The outcome however, could still be a close call, analysts say. Other candidates include Marina Silva, an environmentalist and former environment minister.

The wild card: The World Cup. What exactly does soccer have to do with an election? Well, potentially a great deal if shutdowns associated with preparing or hosting the sporting event takes a toll on the economy, analysts say. A law passed last year gives the 12 cities hosting matches and the states in which they are located the right to declare special holidays on game days, Reuters reported. While it's not yet clear whether these holidays will go ahead, the impact is certainly something to watch.

View from the experts: "The poorer have tended to be loyal supporters of [former President Luiz Inacio Lula da Silva] Lula/Dilma, since the government's social programs benefited them," said Guy Burton, assistant professor, School of Politics, History and International Relations, University of Nottingham, Malaysia. " It's also the case that the support of the Workers Party has shifted over the last decade, from its core base in the industrial urban heartland and trade union movement of the south, including Sao Paulo to the poorer, rural, less educated and marginal Northeast."

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