BUSINESSES worldwide are less edgy on the Israel-Hamas war in the Middle East, and the Taiwan Strait tension. They are far more worried about the increasing tension between Russia and Nato as the Russia-Ukraine war persists.
These are the latest findings in the survey conducted among 103 businesses worldwide last March 4-12, 2024 by the UK-based Oxford Economics. The participating companies collectively employ around 6 million people and have a total turnover of around US$2 trillion.
The Global Risk Survey for March 2024 also showed that more businesses are sanguine about the prospects of near-term global growth.
However, uncertainty hovers on the question of whether the US, Europe and major central banks will ease monetary policies; the most optimistic projection is only 50bps of policy rate cuts for this year.
Geopolitical risks
According to Oxford Economics, business perceptions about their global outlook have improved last month.
Around 30 percent of businesses described the ongoing Israel-Hamas war as a “very significant risk” to the global economy over the next two years.
This is a significant decrease from the survey in the last part of October, i.e. 60 percent. Hamas attacked southern Israel on October 10, prompting Israel to unleash a full-blown military air and ground assault on Gaza Strip.
“Worries over China-Taiwan tensions have declined as well. Russia-Nato worries have edged up this month, however,” the Oxford Economics reported.
Global outlook more positive, but…
Compared to sentiments in January, the outlook of global businesses in the near-term have become more positive.
Oxford Economics clients were asked, “Looking ahead to the next two years, have you become more positive or more negative about global prospects over the past month?
Around 44 percent of the respondents said they are “slightly more positive” now. This is a significant improvement compared to the January 2024 survey, with only 24 percent believing in the turnaround of the global economy.
As geopolitical concerns somewhat eased, fewer businesses are seeing these threats as affecting global growth in the near term (32 percent, from 49 percent in January).
The respondents were asked, “Looking ahead to the next two years, how do you view the risks to our baseline forecast for world GDP growth?”
From 49 percent, the percentage of business of people surveyed who see risks slightly to the downside was down to 32 percent.
“More respondents see risks as balanced than at any time since this question was first asked in 2017,” the Oxford Economics report said.
As for growth expectations, business people still expect the mean GDP growth of global economy in 2024 to be around the range 2.3 percent. The baseline forecast of Oxford this year is 2.4 percent.
Businesses also have low expectations that the monetary policies will ease this year.
“On average, respondents anticipate around 50 bps of rate cuts in the US, eurozone and UK—even less than expected at the beginning of the year,” it added.
The US Federal Reserve is expected to hold another meeting on March 19-20, UK’s Bank of England on March 21, while the European Central Bank will meet on April 11.
No businesses surveyed expect that the Feds will ease its policy rates. “Instead, a majority of respondents anticipate that policy easing at the major central banks will start in the second or third quarter,” it said.
A small percentage—around 25 percent—are expecting a second-quarter easing by the Bank of England; 40 percent think this will be done in the third quarter.
Meanwhile, around 40 percent of respondents are expecting easing of monetary policies in the eurozone by the second quarter. Fewer respondents believe this will be done by ECB on the third and fourth quarter this year.