Subang (March 4): In an uncertain macroeconomic world, there are growing political risks that threaten to disturb the foundations of the global system.

In keynote remarks entitled, “New risks in today’s macroeconomic world”, Professor Tan Sri Dr Lin See Yan, president of Harvard Club Malaysia, said there are five major risks that current businesses are facing.

The risks are

a. power of populism in advanced democracies

b. rising regulatory chaos

c. widening inequality globally

d. the blurred line between defence and commerce

e. the likelihood of recession

Lin believes that a strengthened and sustainable global economy requires mitigation of these risks and joint solutions.

Dr Lin pointed out that advanced economies are generating the most disruptive political risks to business today. The example including the US President Donald Trump’s policy stance to shift to protectionism from free trade, and disruptions caused by Brexit.

While global mergers and acquisitions have hit a record high of US$3.3 trillion in 2018, but with rising regulatory requirements chaos has begun to constrain opportunities for cross-border transactions.

“Turbulent politics is also making antitrust issues more complicated and uncertain in US, Europe and now China,” Lin added.

At the same time, he said the increasing use of an elastic definition of “national security” has threatened the economic integration and blurred the line between defence and commerce.

Most importantly, the threat of enhanced regulatory constraints is making it almost impossible for some multinationals to plan for the long term.

Meanwhile, Lin commented that the problem of widening inequality in the world, in particular in the US, is getting worse. He believes this is mainly attributed to the ignorance about its scale and the redistribution of cash and transfers to the poor and disadvantaged.

Last but not least, Lin highlighted the risk of the world slipping into recession. He noted that some indications have showed the yield curve and credit spreads are now pricing in a probability of 50% that the recession would happen within the next 12 months.

However, Lin is not all that pessimistic. He believes that the recession and bear market may both be avoided in 2019. This is supported by the strength of US labour market, more dovish tone from the US Federal Reserve signalled to pause its rate hike, and current low inflation environment.