Prepare for a 'geopolitical recession' in 2017: Eurasia Group

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The world is heading into a period of "geopolitical recession" in 2017, accelerated by recent trends that reject globalism such as Donald Trump's surprise presidential election win and his "America first" policies, according to one political risk consultancy's annual report.

The "Top Risks 2017: The Geopolitical Recession" report released on Tuesday was co-authored by Eurasia Group President Ian Bremmer and Chairman Cliff Kupchan, heralding the start of a "geopolitical recession," which is defined as a growing vacuum of power in international politics, as the United States shows less interest in assuming global leadership responsibilities.

After last year's shock with the U.K. referendum to leave the European Union to the expected demise of the Trans Pacific Partnership trade deal and America's pivot to Asia , the global political risk environment is at its most volatile in the postwar period.

Here are Eurasia Group's top ten risks for 2017.

1. Independent America

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U.S.President-elect Donald Trump's promise to "make America great again" and to put "America first" is based on the foundation of American independence, according to the political risk consultancy's report.

Trump will seek independence from America's leadership in world affairs and "shake off burdens placed on the U.S. by multilateral institutions and a range of allies," Eurasia Group added.

The former reality television star is a "resolute unilateralist" and will use U.S. power to advance American national interests and as a result will lead to more unpredictable U.S. foreign policy, which rivals such as Russia and China will test.

2. China overreacts

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China's leadership transition, scheduled to take place at the 19th Party Congress in the fall of 2017, could pose significant risks for the country and beyond its borders.

President Xi Jinping might respond more forcefully to foreign policy challenges at a time when all eyes are on his leadership, Eurasia Group said. Xi may also increase the risks of making policy mistakes, as he prioritizes stability over difficult choices in the run up to the party congress.

3. A weaker Merkel

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From disputes over Brexit negotiations to French elections to the ongoing refugee crisis, the leadership of German Chancellor Angela Merkel faces a political storm at home ahead of elections this year.

Public's support for Merkel's refugee policy will be tested as will her negotiation skills in dealing with corporate crises involving some of Germany's biggest companies.

Merkel is expected to win re-election, but the "need to appease domestic critics this year will leave her a diminished figure," according to Bremmer and Kupchan.

4. No reform

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Don't expect much-needed structural reforms this year in both developed and emerging economies, Eurasia Group said.

Political leaders from India Prime Minister Narendra Modi to Mexico President Pena Nieto will not strive for more reforms after having accomplished as much as they could.

Next, Russia, France and Germany will stand pat until major elections are over before implementing hard reforms and China prioritizes stability over reforms until its leadership transition late in the year.

Meanwhile, political leaders in Turkey, Britain and South Africa will be too preoccupied by domestic political challenges to consider a reforms agenda.

Finally, Brazil, Nigeria and Saudi Arabia will set ambitious reform plans, but will likely fall short of what's necessary.

5.Technology and the Middle East

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The wave of technological advancements will likely weaken governments in the Middle East, wrote Eurasia's Bremmer and Kupchan.

On the energy front, the U.S. shale revolution made possible by advances in fracking technologies have substantially weakened the Organization of the Petroleum Exporting Countries (OPEC) leadership. This trend is set to continue this year, which might impact the stability of Middle Eastern states still dependent on oil and gas for state revenue.

Increased connectivity in the Middle East will allow alienated and angry communities to communicate their grievances more easily and organize themselves, which could post threats to existing regimes.

6.Central banks get political

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In 2016, British Prime Minister Theresa May, Trump and German Finance Minister Wolfgang Schaeuble blamed central banks for all sorts of political and economic woes.

There is the risk that Trump could use the Federal Reserve as a political scapegoat, which may put pressure on future central bank decisions.

Meanwhile, over in the Eurozone, European Central Bank (ECB) President Mario Draghi might lack the necessary backing to support ailing European economies if more nationalistic leaders come into power.

7. The White House vs Silicon Valley

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Donald Trump's administration and the U.S. technology sector will be at odds on several key issues, according to Eurasia's "Top Risks 2017" report.

Some of the conflicts will likely be over Trump wanting increased security and control, while Silicon Valley pushes for more freedom and privacy. On the jobs front, the President-elect has promised to create more jobs, as the technology sector invests heavily in automation.

Still, business leaders in Silicon Valley will undoubtedly get behind Trump's policy for corporate tax reform and more streamlined regulation.

8. Turkey

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The failed coup attempt in Turkey last July was an opportunity for President Recep Erdogan to tighten his grasp on the "judiciary, bureaucracy, media and even the business sector through waves of arrests and purges," the report said.

Turkey is also expected to hold a referendum in spring, which will likely be a vote in Erdogan's favor and legitimize his de facto expansion of powers.

"An empowered, post-referendum Erdogan will double down on his preferred policies, aggravating political, economic and security risks," the report added.

9. North Korea

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Reclusive Pyongyang's advancements in nuclear and missile programs pose a clear threat to the U.S. that Trump has already reacted to in a tweet.

One potential risk is that the U.S.-China relationship could deteriorate if Trump coerces Beijing to tighten sanctions on North Korea. The second big risk comes if South Korean President Park Geun-hye is replaced by a center-left government that favors diplomacy with North Korea and refuses to work with the U.S. on new sanctions and military options.

10. South Africa

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South African President Jacob Zuma faces continued political infighting within and beyond the ruling African National Congress, the Eurasia Group said in the report.

The domestic struggles will overshadow much needed economic reforms, and will limit South Africa's ability to offer leadership to neighboring countries in the midst of conflict.