When FSG’s research team came together to discuss the events that could disrupt business next year, one theme dominated. Governments can handle one year of slowing growth; they maintain spending where they can and wait to see if the tide passes. However, in a second year of slowing growth, which we will see in 2016, governments can no longer go without adjusting their plans. As a result, six of FSG’s eleven Events to Watch in 2016 reflected this dynamic. While the manifestation of this reality has different characteristics depending on the country or region, the undertones and drivers are the same. Government policy changes could prompt substantial disruption to business in an international portfolio.

Governments are feeling the pressure of global economic events

Global economic events have constrained government realities in the past year. The falling prices of energy and other commodities have reduced government revenues in some countries. Others have seen substantial currency depreciation that makes imported goods more expensive, constraining governments’ ability to provide the same goods and services to businesses and consumers.

As these changes have settled in, governments have slowly come to terms with their “new normal” and are making changes to address it. Some are cutting subsidies to businesses and consumers or increasing import taxes, disrupting the cost and pricing assumptions that companies have used before. Others are encouraging consumers to buy local at the expense of foreign companies. In many cases these changes are not malicious, but rather the reaction of being between a rock and a hard place. Regardless of intention, businesses could feel the squeeze of changing cost assumptions or a shifting addressable market if these events were to transpire.

FSG clients can access the full report, “2016 Events to Watch” via the client portal. Not a client? Contact us to learn more.