There are an increasing number of managers around the world who see economic conditions improve. And the good news is that there is even less fear for the eurozone. But the risks are not over. Now it is domestic political conflicts that are frightening. This was revealed by the latest survey of March 2013 by the consultancy giant McKinsey carried out among executives from all over the world.
In fact, if low consumer demand remains the most feared risk to growth for next year, political conflicts are immediately behind it and are perceived by managers as a potential threat to domestic growth. 38% of managers think so, alongside those who believe (37%) that a further risk comes from the lack of support from government policies. And these are not passing concerns: political risks are being singled out as a threat to growth over the next ten years as well. But for the eurozone there is another cause for concern: the low level of innovation.
THE CURRENT SITUATION
Compared to December, more managers believe that economic conditions in their country are better than six months ago. Particularly positive are executives from developed Asia whose share has nearly tripled since the previous survey, although they were among the most negative during 2012. Eurozone executives remain the most pessimistic, but more and more see conditions improving: 30% against 15% three months ago. Expectations for the next six months reflect current perceptions on the state of the economy: the most positive about the future are the Indians, the most cautious and uncertain are those of the Eurozone who are divided almost equally between optimists, indifferents and pessimists.
Political concerns are particularly felt, for example, in the US due to the failure of the negotiations on automatic cuts in public spending which became operational the week before the survey. But also in India where 40% see the transition of political leadership as a risk (18% is the world average on this aspect).
On the positive side, the results indicate that global worries about the eurozone have eased. Fewer and fewer managers inside and outside Europe believe it is somehow possible that countries will leave the Eurozone in the coming year or that the euro will founder as a single currency. Eurozone managers themselves are the least concerned about these aspects and believe that an increase in the inflation rate is less likely.
THE LONG-TERM PERSPECTIVE
Political risks are starting to worry managers more and more even in relation to a long-term look at the first ten years. These fears are followed by concerns raised by low levels of innovation, government regulation and problems with access to talent. However, the long-term risk map varies significantly from region to region. While political risks remain the main fear in the USA, developed Asia is concerned about the trend in demand, India fears a lack of support from government policies, while the Eurozone is frightened by low levels of innovation. In developing countries, the uncertainties of managers are equally divided between political risks and innovation.
The shocks of the next decade for the global economy? Managers are resolute: 63% will come from the Middle East and North Africa, which are slightly more feared than volatile oil prices (61% of managers). As the risk moves away Asia: managers who believe that an economic shock in the area is likely in the next year are only 12% against 30% who shift the threat to the next decade.
