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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.

And political risk falls at a time when investors are assessing just what an unwinding of U.S. monetary stimulus means for the developing world.

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.

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"There has been a notable shift in market concerns about emerging markets over the past month or so," said Nicholas Spiro, managing director at Spiro Sovereign Strategy. "While the May to August 2013 phase of the sell-off was dominated by fears about balance of payments weaknesses, the current phase is about a broader set of risks, in particular growth, the credibility of the policy-making regime and the political climate in general."

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

Indonesia

Jakarta governor Joko Widodo.
Bay Ismoyo | AFP | Getty Images

Election due: The results of April's legislative elections are due in early May, followed by a presidential election in July. 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. After seeing its deficit narrow to 1.98 percent of gross domestic product (GDP) in the fourth quarter of 2013, the government now expects a figure of less than 3 percent for the first three months of 2014. The central bank has hiked rates five times since the middle of last year to prop up a crumbling rupiah.

Read MoreWhy Indonesia's parliamentary elections matter

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.

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

What you need to know about Indonesia's election
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What you need to know about Indonesia's election

Expected outcome: Early tallies from April's legislative vote showed the Indonesian Democratic Party-Struggle (the PDI-P) won around 19 percent of votes, the biggest share of any party but well below the 25 percent needed to nominate candidate Jakarta Governor Joko "Jokowi" Widodo, viewed as a favorite to win, for president.

To resolve that, the PDI-P and smaller National Democrat party (NasDem) struck an alliance during the weekend of April 14. Since the National Democratic Party won about 7 percent of votes in the legislative polls, the coalition effectively clears the way for Widodo to run for presidency in July. May 10 is the deadline for parties to nominate their candidates for president.

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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: "Regardless of the election results, we believe the new administration will maintain the major economic policy initiatives of the previous government with further legislation in the mining and agribusiness sectors set to materialize," analysts at Standard and Poor's said in a report.

India

Supporters of Rahul Gandhi, the leader of India's ruling Congress Party, gather at a rally on April 6, 2014 in New Delhi.
Getty Images

Election due: The country's 815 million voters will be casting their ballots from April 7 to May 12 with results due by May 16.

Backdrop: India, Asia's third-biggest economy and the world's largest democracy, kicked off 2014 on a gloomy note, with growth expected to drop below 5 percent for the 2013-14 year as the country battles the worst slowdown since the 1980s. The economy's trade gap in March widened to $10.51 billion, its highest since October 2013, while industrial output has fallen in four of the last five months.

Read MoreWild ride ahead for Indian equity investors

However, a strengthening currency has provided some relief for investors. The rupee is over 12 percent higher since hitting an all-time low in August 2013. Meanwhile, the government in its budget earlier this year unveiled indirect tax cuts to help woo voters.

Key election themes: Consumer inflation, running at an annual rate above 9 percent, and rampant corruption.

Indian candidates differ in social media strategies
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Social media in India's election

Expected outcome: The latest opinion poll from private news channel NDTV shows that the Bharatiya Janata Party (BJP), led by Narendra Modi, and its allies are set to win a narrow majority of 275 seats, which would see the ruling Congress party defeated.

The wild card: The anti-corruption Aam Aaadmi 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.

Read MoreChange for India's economy long way off, despite election

View from the experts: "The main thing now is that we get a stable and effective government," said Standard Chartered senior economist Anubhuti Sahay. "Since 2010, policy making has not happened at the required pace, so the election could be a turning point for the economy and that would mean the investment environment improves."

Turkey

Prime Minister Tayyip Erdogan
Uriel Sinai | Getty Images News | Getty Images

Election due: Municipal elections on March 30 declared Prime Minister Tayyip Erdogan's Justice and Development Party (AKP) triumphant. Presidential elections are set for August and parliamentary elections are due in 2015.

Backdrop: The ruling AKP, which has been in power since 2003, has been hit by a high-level bribery and corruption scandal that sparked street protests late last year. Most recently, Erdogan imposed a ban on social media site Twitter, invoking backlash about the country's control on freedom of expression.

Read MoreTurkey turmoil has not put us off: Mitsubishi

Moody's has since cut the outlook of Turkey's sovereign rating to negative while the International Monetary Fund revised its real gross domestic product forecast to 2.3 percent this year, from 3.5 percent. Meanwhile, the Turkish lira continues to fall after hitting a record low against the dollar in January, which forced the country's central bank to hike interest rates.

Key election themes: Corruption, inflation

Expected outcome: Erdogan is widely seen as winning the presidential elections later this year after the AKP secured 45 percent of the vote in March's municipal elections, compared with 28 percent for the main opposition Republican People's Party (CHP). The CHP has since called for a recount, citing irregularities, but their demand has been refused by the High Election Board.

Why investors are happy with Turkey's elections
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Why investors are happy with Turkey's elections

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, earlier this year 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.

Read More Turkey, an emerging market dream turned into a nightmare

The wild card: The controversial Gülen Movement, an Islamist group led by U.S.-based preacher Fethullah Gulen, has been trying to ruin the AKP's image ever since implicating the prime minister in a bribery scandal last year. Having emerged as a powerful force in the months after, the group is known for its deliberate attempts to infiltrate government structures.

View from the experts: March's election result "is a bullish outcome for the local market simply because investors are not keen on heightened political uncertainty and instability," said Benoit Anne, head of emerging markets strategy at Societe Generale, adding that he expects "a pretty healthy rally for both the lira and local rates".

Brazil

Street scene in Belem, Brazil
Getty Images

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 more than 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 325 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.

In March, Standard & Poor's (S&P) downgraded Brazil's long-term debt rating to BBB minus, one notch above "junk" status. It is the latest blow to Rousseff who has struggled to revive the economy since the 2011 slowdown that has plagued her presidency since she succeeded Lula da Silva.

Read MoreBrazil flirts with junk status - what happened?

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

Brazil has 'strong' macro fundamentals: Pro
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Brazil has 'strong' macro fundamentals: Pro

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 latest poll by Ibope showed Rousseff with 43 percent of the electorate's support.

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.

Read MoreBrazil needs investors to reclaim BRIC growth

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."

South Africa

Table Mountain, Cape Town
Getty Images

Election due: General election scheduled for May 7.

Backdrop: South Africa's economy grew 0.7 percent on quarter in the third quarter of 2013, the slowest pace in more than four years, and sticky inflation stood at an annual 5.4 percent on year in December. Its currency, the , hit a five-year low against the dollar in January, exacerbating labor disputes and a wide current-account deficit.

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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.

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.

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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 last month. "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."