"Political uncertainty leads to economic uncertainty and these things are inter-dependent. The markets so far have taken the posture in its stride. My sense is there'll be some noise in the markets in the short run, but I think unless the substance of the threats increases, markets will take it in its stride," McFarlane told CNBC at the sidelines of the Singapore Summit.
Commenting on how political leaders around the world, including U.S. President Donald Trump, are handling the situation with North Korea, McFarlane said sanctions are "the natural way to go" to try to get "more realistic outcome."
However, he added that he doesn't think a resolution is in sight yet.
Political uncertainties aside, the banking veteran said global growth will continue to be moderate, especially as developed markets are still registering soft economic data.
While many are worried that the Trump administration's protectionist inclination may pose more harm to the world economy, McFarlane said globalization is not threatened by the new president and his policies.
"I've seen business people go into politics and it's always very difficult for them in the early stages ... Seasoned politicians know how to get things done, I think Donald Trump is looking for economic outcomes and therefore will try and get more activity in the U.S. in that context," McFarlane said.
"I don't think there's a real threat to globalization. Economic activity will flow to where the competitive advantage is and where the costs are lower," he added.
— CNBC's Jacob Pramuk and Cheang Ming contributed to this report.