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According to a survey of chief executives conducted by A.T. Kearney, most expect the business landscape next year to be marked by increasing operational difficulties, economic and geopolitical volatility. Some takeaways?
Terrorism. Yes, ISIS or ISIL is going to shake things up. According to the survey, released on Tuesday, 82% say volatility and terrorism will intensify later this year into next. Forty-two percent say geopolitics will be an important business challenge compared to only 29% who said so in 2014. Policy and regulatory concerns are at the forefront, 46% of survey respondents citing it as one of their top operational challenges.
Other survey responses show that 72% believe oil prices will remain low and 76% said that struggling emerging markets will make a comeback next year.
Emerging market leader China has been the cause of much panic over the last few weeks. The market erased its gains on the year this week. On Aug. 11, the People's Bank of China lowered the value of the yuan against the dollar by allowing for the currency more room to trade at lower levels. It is currently 6.41 to the dollar. It was 6.13 to the dollar before the trading band changed two weeks ago. The market saw this as a sign of official panic. China hasn't recovered since.
A.T. Kearney respondents said China will remain a sore spot, but few are sold on a hard landing. Some 77% of executives said it is more likely than not that China’s economic growth will slow considerably over the next 12 months, to just 6%.
This reflects concerns regarding China’s ability to successfully transition from an export economy to a consumption-based economy. Fears of a stock market bubble, and increasing debt levels of corporations and local governments remains a drag on China, in particular.
The International Monetary Fund forecast in April 2015 that China’s economic growth will average 6.7% in 2015, before declining to 6% by 2017. A.T. Kearney's executives said that deceleration was a given, but noted that
that such a slowdown may not be a sign of a weak economy, but instead a move towards a more modern economy driven by private investment and consumption.
Closer to home, American executives are more worried about terrorism than anyone else outside of the terrorist hubs in Middle East/North Africa.
CEOs across all regions agreed by a wide margin on the Middle East and North Africa were the most unstable. But some 22% of European executives said Russia, Eurasia, and Eastern Europe would be politically tense, and executives from Asia said China (17%) and South Asia (15%) will be problematic.
