Global trade drying up, says largest ever economic survey of finance professionals
Almost three quarters of the finance professionals sampled believe that the global economy is either deteriorating or stagnating, with nearly half reporting a loss of confidence in the prospects of their organizations during the last quarter of 2011.
This edition of the GECS surveyed 3,775 professional accountants, including 1,414 senior executives, from around the world and is the result of the collaboration between two major professional bodies: ACCA (the Association of Chartered Certified Accountants), the global body for professional accountants and leader of the GECS since 2009, and the Institute of Management Accountants (IMA), the US-based association focused exclusively on the management accounting profession. They joined forces for this survey to develop an even more robust and powerful record of the state of the global economy.
“Their views paint a sobering picture of the global economy”, says report author Manos Schizas, senior policy adviser with ACCA.
“Once again, the biggest loss of confidence came in Hong Kong, Singapore and Cyprus, all countries heavily exposed to international trade and cross-border financial activity, which also reported some of the worst perceptions of the global economy; this among other things suggests to us that international trade is in decline.” said Dr. Raef Lawson, vice president of research at IMA.
Similarly, the survey found that professionals in utilities firms, which are often domestically focused and fairly robust to economic conditions, reported some of the strongest net confidence gains. On the other hand, pharmaceuticals and IT/communications firms were some of the hardest hit.
At the regional level, Central and Eastern Europe has performed the worst in terms of business confidence, and the Asia-Pacific region is losing confidence at a rate faster than that of Western Europe. Africa, the Middle East and South Asia remain the most upbeat regions, in terms of both business confidence and respondents’ perceptions on the state of the global economy.
While respondents in some regions have said there are encouraging signs from resilient levels of new orders, the damage done to global demand over the last year has been substantial.
“After three consecutive quarters of weakening demand, the cumulative effect is beginning to take its toll on business, and with banks around the world facing an uphill climb towards capital adequacy tightening finance is now adding to this challenge. The result is a deteriorating outlook for business cashflow around the world which may be driving a rise in business failures. Inflationary pressures, which built up steadily over the past two years, are now easing, but the underlying causes of this trend may be just as worrying as last year’s rise in operating costs,” said Manos Schizas.
In line with this deteriorating outlook, survey findings point to weakening trends in employment and investment globally. ACCA and IMA find this particularly worrying, because these two indicators have remained weak throughout the last three years and are crucial to any kind of sustainable recovery.
Canada emerged as the only one among the major ACCA/IMA markets in which the government’s economic policies received, on balance, a positive assessment from respondents, despite expectations of (comparatively modest) fiscal austerity.
Finally, the survey’s findings suggest governments have to perform a tough balancing act in coming years if they are to support a flagging economic recovery. Sustainable fiscal stimulus is a luxury that not all governments can afford, especially among developed nations, while austerity is proving hard to reconcile with sustained growth. As a result, government approval levels are at a record low, just when they are most likely to influence business confidence.
Canada: by the numbers
In terms of the headline indices tracked by the survey, both business confidence and perceptions of the global economy are very similar in Canada to those reported throughout North America. Only 16% of respondents reported increased confidence in the prospects of their organizations, against 45% who reported a loss of confidence, and about two thirds of the sample (67%) expected the global economy to stagnate or deteriorate further. While this may sound gloomy, in fact North America is quite optimistic compared to the total IMA/ACCA sample.
The full Global Economic Conditions Survey Report for Q4 2011 is available on the following link: