KUCHING: Malaysia has been one of the few major markets to have genuinely recovered in the second quarter of 2014, according to the largest economic survey of finance professionals around the world organised by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA).
The latest findings of the Global Economic Conditions Survey (GECS) show that access to growth capital improved substantially in the quarter, reaching its best levels in at least two and a half years, and there were signs of a slow return to financial stability, with inflation and exchange rate volatility falling.
Additionally, cashflow and demand conditions improved, in line with the broad trend of the last fifteen months. The result was a strong rebound in business capacity building and a smaller uptick in opportunities for inorganic growth, but with growth in the rest of the region facing strong headwinds, opportunities for organic growth fell.
Although this development would normally tend to depress business confidence, it has been balanced out by expectations of stronger medium-term growth in government expenditures.
In response to these broadly benign readings, business confidence rose to the highest levels in a year – rivalling the post-election highs of 2Q in 2013. About 18 per cent of respondents reported confidence gains of up from 12 per cent, while 28 per cent reported a loss of confidence – down from 49 per cent.
Manos Schizas, senior economic analyst at ACCA and editor of the survey said: “The macro economic outlook has also returned to post-election levels of euphoria: 37 per cent of GECS respondents in Malaysia believe conditions are improving or about to do so, up from 27 per cent previously, while the pessimists made up 55 per cent of the Malaysian sample, down from 63 per cent.”
Globally, the economic recovery has once again run out of momentum, according to the GECS.
Business confidence fell marginally in 2Q, and is becoming increasingly reliant on financial stability. ACCA and IMA believe that this is a sign of mounting risks for the future of the recovery.
“Although the change in business confidence between 1Q and 2Q is statistically negligible, this apparent stability is the result of dwindling business opportunities and an improving investment environment cancelling each other out, according to the report’s findings,” Schizas added.
“The survey shows that there is growing business dynamism around the world, with North America and South Asia leading the charge in terms of capital spending, new orders and headcount. Conversely, Africa and the Middle East fared worst, with all three areas either falling or stable.
“Overall, most of the world’s confidence boost appears to be coming from North America, as well as a temporary rebound in Central and Eastern Europe, but improvements in these regions were balanced out by receding optimism throughout Asia, Western Europe, Africa and the Middle East. Post-taper, emerging markets are still underperforming in crucial areas such as access to growth capital, but the gap between them and the more developed markets is now narrowing.
“One positive sign for the Asia Pacific region and beyond is that China’s prolonged slowdown is now starting to bottom out, which should be good news for a range of suppliers and commodity producers worldwide.”