Political transitions are a leading risk to global and domestic growth – and companies see this as one of the more pressing threats to business, according to an end-of-year report on economic conditions by McKinsey. The study also highlights slowing trade as a threat to global growth, particularly for businesses in Asia, but it found that business sentiment is generally positive: “Despite these uncertainties, executives are more positive than negative about economic prospects at home and, as they have all year long, expect global economic conditions to hold steady.”

The Trump and Brexit factors

The survey found that, in December 2016, 45 per cent of all respondents said that political transitions are a potential risk to global economic growth in the coming year. This figure has risen from 19 per cent in March 2016 – a marked increase that could be attributed to the political turmoil this year. The graph below shows that geopolitical instability has been a significant risk factor throughout 2016.

Trade contractions

Forty per cent of those surveyed cited slowing global trade as a risk to global growth. This concern was more prevalent in Asia-Pacific and China than in Europe or North America. It's a concern that is, however, justified, as the WTO has estimated the rate of world trade growth at 1.7 per cent for 2016 (down from a forecast of 2.8 per cent made in April). This represents the slowest trade growth since the financial crisis.

And despite slowing trade and political instability, business executives in both China and the US are bullish about the future prospects of their economies in the coming six months. In China, 32 per cent of executives think the economy will be 'better' in the coming six months. This compares to more than half (53 per cent) of executives in the US and 72 per cent of those in India, as shown in the graph below.

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CTMfile take: These survey results seem to suggest that, despite the political uncertainty in 2016 caused by events such as Brexit and Trump's presidential election, the global economy and trade are in many ways robust and business exectives continue to feel bullish even during periods of political transition.