Fasten Your Seat Belts It's Gonna Be A Bumpy Year

How BUSINESS WEEK's correspondents read the crystal ball

As the new year starts, we asked BUSINESS WEEK correspondents around the globe to offer some bold predictions about what might happen in their countries and regions over the next year. To look around the world is to find plenty of reasons for worry. Though Boris Yeltsin may hang on, economic reform is under pressure in Russia and elsewhere. Instability is clearly on the rise in China. Mexico--once the darling of emerging-markets investors--is still on its knees. But there are some bright spots. The Arab-Israeli conflict is almost over. Japan seems to be waking from its torpor. The worldwide anticorruption drive is likely to continue. Here are the predictions:

STRUGGLES IN RUSSIA. President Boris Yeltsin will surprise many observers by defeating the revived Communists and others in the June presidential elections. He may help his cause by co-opting his only serious reform rival, Grigori Yavlinsky, perhaps by offering him the premiership. But public anger at the increasing domination of the economy by a handful of banks and industrial groups will increase.

CHINA-U.S. STRAINS. U.S.-China tensions are likely to increase as the Presidents of both countries scramble to cling to power. In the U.S., Bill Clinton will take heat for China's mounting trade surplus and its dismal human-rights record. He won't get much help from his Beijing counterpart, Jiang Zemin, who'll be under pressure to show he is tough.

JAPAN POWER SHIFTS. International Trade & Industry Minister Ryutaro Hashimoto will dump the weak Premier, Tomiichi Murayama. That will set up an election battle between Hashimoto, who heads the Liberal Democratic Party, and reform shogun Ichiro Ozawa. Hashimoto would win if the election were held now, but support for Ozawa is growing. Ozawa would likely be a bolder, more decisive leader. But either would be an improvement.

BYE-BYE MAASTRICHT. With hopes of political and monetary union fading, European politicians will scramble to salvage the European Union as a free-trade zone. The Germans will push to speed EU admission for Poland, the Czech Republic, Hungary, and other eastern aspirants. Worries about drug smuggling, crime, and illegal immigration could prompt curbs on free travel within the EU.

GONZALEZ TO EXIT. The last major European socialist leader, Spanish Prime Minister Felipe Gonzalez Marquez, will be dumped in March elections. But his anti-right-wing campaigning will deny the new conservative Premier, Jose Maria Aznar, a majority in Parliament, leading to political gridlock.

NO CANADA? Canada, ranked by the U.N. last year as the world's best place to live, will move closer to breaking up. Later this month, Lucien Bouchard, Quebec's most charismatic politician, will take over as premier of Quebec. His declared mission: to make Quebec independent as soon as possible. Some observers believe Bouchard might call an election as early as this spring. At the same time, resistance to Quebec's demands is likely to stiffen in English-speaking Canada and the Canadian welfare state will continue to unravel.

MORE MIDDLE EAST PEACE. Chances are growing for a Syrian-Israeli deal, which would de facto include Lebanon. Israeli Premier Shimon Peres badly wants to wrap this one up before Israeli elections, which are scheduled for November but could be moved up. Right now, Peres is well ahead in the polls, but his lead will probably erode as the reaction to the assassination of Yitzhak Rabin fades. Still, Peres is likely to win.

Meanwhile, an improving economy will contribute to increasing stability in the Palestinian areas. Yassir Arafat, who has little opposition, will use the the Jan. 20 elections to consolidate his position.

MEXICO'S AGONY. As disappointing economic performance continues, new challengers to President Ernesto Zedillo Ponce de Leon are likely to emerge. One possibility: The ruling Institutional Revolutionary Party will finally split, with dissidents helping to form the center-left party that many analysts think Mexico needs. The Zapatista guerrilla leader, Subcommander Marcos, also says he will enter national politics.

TRANSPARENCY. Prosecutors and opposition politicians will continue the worldwide anticorruption drive that caught fire in 1995. Corruption will be a big issue in Mexico and a growing one in such Middle Eastern states as Saudi Arabia, Kuwait, and Egypt.

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