Global economy grew substantially in first quarter of 2012 — ACCA
Posted on April 27, 2012, Friday
KUALA LUMPUR: The latest edition of the Global Economic Conditions Survey, conducted by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA) suggests that the global economy recovered substantially in early 2012 and regained some of the dynamism it had lost over the last year.
The survey findings, representing the views of about 2,200 professional accountants around the world, were welcomed by the two professional bodies.
The share of respondents reporting confidence gains in their own organisations had nearly doubled from 16 per cent in late 2011 to 29 per cent, and while the majority (54 per cent) still believed the global economy was deteriorating or stagnating, that figure was down from 73 per cent in the previous quarter.
Emmanouil Schizas, editor of the ACCA/IMA Global Economic Conditions Survey, said of the global findings, “When all the results came in, we were a little sceptical and had to consider all of the likely objections first.
“Much of the rise in confidence is being reversed as we speak, as the relief factor subsides, but a lot of it is here to stay.”
Across the Asia-Pacific region, 23 per cent of respondents reported gains in business confidence (up from 11 per cent in late 2011) against 44 per cent who reported a loss of confidence (down from 53 per cent).
This was tied to an increased optimism about the global economy: 34 per cent of respondents in the region felt it was improving or about to, up from 19 per cent three months ago.
Despite all of this positive sentiment, and for the first time since the GEC surveys began, the Asia-Pacific region recorded lower confidence levels in 1Q 2012 than any other part of the world, and only respondents in Europe were more pessimistic about the prospects of the global economy in general.
Within the region, Malaysia recorded the smallest confidence gains despite more firms enjoying the upside where 20 per cent reported confidence gains against eight per cent in the last quarter, due to a rising segment of the population reporting strong losses of confidence (22 per cent, up from 13 per cent).
The East of the country appeared to have performed the worst. This sentiment was recorded even though Malaysia recorded the strongest improvement in investment activity of all the major ACCA/IMA markets.
Furthermore, in the Asia-Pacific region, access to finance had improved considerably for businesses, with only 20 per cent of respondents (down from 34 per cent) reporting problems with access to finance.
Malaysia leads this trend, followed by mainland China.
ACCA Malaysia country head, Jennifer Lopez said, “It is likely that the low confidence felt in Malaysia is residual of what was felt during the last quarter of 2011.
“While our economy is somewhat cushioned from the recessions happening in the West, the fact is that Malaysian businesses have been affected by what’s happening in that part of the world.
“It seems that many are cautious about taking recovery news at face value, and for good reason given how volatile the global economy has been.” Looking globally, ACCA and IMA attributed much of the rise in global business confidence to objective improvements to the business environment, especially new orders, but also warned that relief is an important driver in the short term – especially due to the fact that a number of nightmare scenarios that had seemed likely in late 2011, such as an escalation of the European sovereign debt crisis or a hard landing in China, appeared more remote in the last quarter.
There also appeared to be a renewed faith in the prospects of the global economy and the strength of the recovery.
These developments were also reflected in rising business investment and employment.
Confidence gains were fairly consistent across regions and industries, although the Americas and Western Europe seemed to benefit the most in early 2012, as did manufacturers and distributors, particularly in the high-tech sectors.
The survey reported increasing business dynamism, mostly in the Americas and Asia-Pacific, with businesses securing new orders where previously they would not have and responding with increased investment and hiring.
ACCA and IMA welcomed this development, noting that investment had been subdued at the global level since the end of the ‘green shoots’ stage of the global recovery which lasted from mid-2009 to mid-2010.
Africa was still the most confident of the seven major regions covered by the survey, but it was clearly losing ground.
ACCA and IMA believed that the bounce in investment was focusing on two kinds of opportunities in particular.
Customer insights, namely the need to understand and benefit from spending decisions under new constraints, was one; the other was supply chain optimisation through deepening relationships and a stronger focus on quality.
The professional bodies also acknowledged the contribution of governments in their major markets, many of which showed signs of loosening their fiscal policies to boost a flagging recovery.
It was not clear how much longer they could afford to do so, as respondents generally continued to believe that many major economies, including both the US and China, were likely to spend unsustainably in the medium term.
On the other hand, finance professionals in Western Europe and other countries experiencing austerity also doubted the sustainability of their own governments’ fiscal policies.
Emmanouil Schizas said, “It’s too early to say whether the pattern of the modest recovery in 2012 is sustainable, but it seems to rely on a sustained recovery of demand in the West, supply in the East and confidence in sovereigns.
It’s a precarious balance.” — Bernama