Survey Shows Belief In Improved Global Economic Conditions

Risks for domestic economic conditions growth

Economic momentum has shifted and will continue to move from the developed to the developing world, reveals McKinsey’s latest survey on economic conditions.

The McKinsey survey was conducted with 1,499 executives across regions, and points out that a majority of executives indicated global economic conditions have improved in the past six months.

Improved global economic conditions

According to the survey, for the first time, a majority of executives have reported better global economic conditions since McKinsey initially posted the question in March 2012.

The survey points out that as of September, executives in developed economies are markedly more upbeat than their emerging-economy peers about conditions at home.

However, across all regions, 53% of all respondents agree that global economic conditions have improved. This can be evidenced from the following graph:

The McKinsey survey reveals that at the country level, executives’ bullishness is steadily growing. For instance, 45% of executives say economic conditions are better now than six months ago, up from 42% in September and 36% in June. However, the views vary across regions.

Interestingly, respondents in developed Asia are twice as likely as those in developing markets to say conditions have improved.

The following graph captures the current conditions in respondent’s countries as opposed to conditions six months ago:

Current conditions  Economic Conditions

Challenges for 2014

Despite the respondents in the McKinsey survey echoing positive vibes for 2013, they still identify several challenges that have made doing business more difficult over the past 12 months.

For instance, over half of respondents cite the slow rate of global growth as their top challenge. This is followed by the slowdown in emerging markets and persistently high unemployment as the next challenges that the respondents have to grapple with.

Interestingly, compared with the global average, larger shares in the eurozones cite government austerity and high unemployment as challenges. In India, 55% of executives cite the emerging market slowdown, compared with 35% of all respondents.

The respondents to the McKinsey survey anticipate a shift in the types of risk that could interfere with growth in the coming year. It is pertinent to note that recent worries about geopolitical instability have subsided and executives are now more concerned that domestic political conflicts pose a threat.

The following graph highlights the domestic political conflict now placed second only to low demand as a risk to economic growth at home:

Risks for domestic  Economic Conditions growth

The McKinsey survey also points out that executives in their investment decisions also note a new concern viz.: rising asset prices, which could affect company-level growth in the coming year.

The survey also highlights across regions, executives working in developed Asia are the most optimistic while those in the eurozone are the most pessimistic about their companies’ prospects.

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About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

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