Gear Shift? Relax on Europe, Beware Emerging Markets

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Emerging markets will be the biggest risk to watch out for in 2013 as worries about Europe and the U.S. take a back seat, Eurasia Group, a think tank, predicted in its annual top risks report.

With the immediate worries that the U.S. could go over the so-called fiscal cliff having subsided and the threat of a euro zone break up having been kicked into the long grass, the developed countries "look like the better bet". Emerging markets meanwhile will see "much more volatility and instability,"according to the report. The report, which highlights the key areas of concern for global investors and the broader business community, also questions the validity of the term "BRIC" as useful for a group of such diverse countries.

Speaking to CNBC, Wolfango Piccoli, Director at Eurasia Group, said the time of abundance was over. "The shift of risk is back to emerging markets. The downside risk will differ from country to country.In our view for the euro zone, market pressure has gone. Greece is set to remain a noisy story but euro zone is not going to be as big a risk as it has been for the last couple of years," Piccoli said.

Europe has dropped to sixth place in 2013's top ten. It was the third biggest risk in 2012 and the second biggest in 2011.

The group also suggests the use of the term "emerging markets" will drop out of use once China becomes the world's largest economy, but until then its usefulness is hindered by the lack of a definable asset class.

China forms risk number two, with a number of political but also natural and environmental problems. Freedom of information will be the biggest source of tension for the country, the report says.

"There are two stories about China, regional tensions where we'll see more tension with Japan, and domestically the real challenge [which]will be the control of information and the web. We'll see a more aggressive China," he added.

China is also mentioned in risk number seven -- East Asian geopolitics -- as it becomes more nationalistic and regional relations become more strained. That is a reference in part to the continuing territorial dispute between China and Japan over a group of tiny islands in the South China Sea. North Korea is notable here for the fact that the report sees it as a 'red herring' risk unlikely to materialize.

The Arab Summer and Washington politics make up numbers three and four. On the former, the report says conflicts and sectarian strife will continue while with the added risk to draw in larger parts of the region. A resolution will remain elusive, the report says. Washington politics poses a risk because dysfunctional American politics has become the norm, according to the report. It adds that a number of contentious partisan issues will come to the fore in 2013, not least the issue of raising the debt ceiling at the end of February. The report suggests Washington is suffering from "procrastinator's curse."

Although it forms part of the most significant risk for 2013, India also gets a separate mention at number nine.The "Tiger" economy has failed to match the strength of its neighbor's China and the report suggests political paralysis, which characterizes much of the domestic political scene, is to blame.

South Africa takes the tenth position because of a difficult domestic political landscape and continued social and political unrest giving"little reason for optimism."

By CNBC's Shai Ahmed; Follow her on Twitter @shaicnbc