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Accountants give negative report for 2010 outlook
April 16, 2010, Friday
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AS with previous Global Economic Conditions Surveys, the headline findings of our first survey for 2010 are sobering.
The findings of the Q1 2010 survey suggest further divergence in the economic trajectories of the world's regions.
Only in Africa are respondents still reporting an accelerating net improvement in economic conditions, although these perceptions are accompanied by easing income expectations and forecasts of a long and weak recovery.
In the Asia-Pacific region, the pace of recovery, while brisk, appears to have leveled off in almost all respects and business confidence has eased significantly.
The Americas, alongside Central and Eastern Europe, have finally crossed into positive territory, if only marginally so, while Western Europe continues to languish behind the rest of regional markets.
Moreover, it is not finance professionals in the laggard economies, but rather those in Asia and Africa that are revising their outlook and expectations downward; they have been doing so for at least six months.
Further analysis of the drivers of optimism based on pooled data from past surveys suggests that accountants in these regions (and some of their colleagues elsewhere) may be losing faith in the recovery primarily because of a fall in the number of profitable investment opportunities and receding government support for investment.
In fact, it is worth noting that government support for investment in the Asia-Pacific region fell for the first time since Q3 2009, when this question was first asked.
Consequently, investment in both staff and capital projects remains in negative territory.
In addition to these observations, it is worth highlighting one source of downside risk that is rising in importance.
For much of 2009 policymakers have made much of the threat of deflation, but this has always remained a problem of the West for the most part.
In Africa, inflation never receded in the first place, with a reliable 50 percent of the sample and often more reporting increasing costs each quarter.
In the early days of the recovery, this has been partly due to shifting exchange rates, but inflation has persisted even as currency markets stabilized.
In the Asia-Pacific region, the share of respondents reporting rising operating costs has risen in every quarter since these surveys began, and jumped from 24 percent to 36 percent in the three months to February 2010.
In fact, every major region for which a robust sample was available showed signs on returning inflation in the first quarter of 2010.
Our findings this quarter will offer little comfort to most readers. In short, the global economic recovery appears to have run out of steam.
It is certainly encouraging that downside risks to the recovery are receding, but with these no longer obscuring the picture, the fundamental weakness of the global economy is finally plain for all to see.
This leaves no room for complacency for policy makers, who must develop a robust, forward-looking growth agenda to match their response to the downturn so far.
(The article is adapted from the latest Global Economic Conditions survey by ACCA - Association of Chartered Certified Accountants. The views are its own.)
The findings of the Q1 2010 survey suggest further divergence in the economic trajectories of the world's regions.
Only in Africa are respondents still reporting an accelerating net improvement in economic conditions, although these perceptions are accompanied by easing income expectations and forecasts of a long and weak recovery.
In the Asia-Pacific region, the pace of recovery, while brisk, appears to have leveled off in almost all respects and business confidence has eased significantly.
The Americas, alongside Central and Eastern Europe, have finally crossed into positive territory, if only marginally so, while Western Europe continues to languish behind the rest of regional markets.
Moreover, it is not finance professionals in the laggard economies, but rather those in Asia and Africa that are revising their outlook and expectations downward; they have been doing so for at least six months.
Further analysis of the drivers of optimism based on pooled data from past surveys suggests that accountants in these regions (and some of their colleagues elsewhere) may be losing faith in the recovery primarily because of a fall in the number of profitable investment opportunities and receding government support for investment.
In fact, it is worth noting that government support for investment in the Asia-Pacific region fell for the first time since Q3 2009, when this question was first asked.
Consequently, investment in both staff and capital projects remains in negative territory.
In addition to these observations, it is worth highlighting one source of downside risk that is rising in importance.
For much of 2009 policymakers have made much of the threat of deflation, but this has always remained a problem of the West for the most part.
In Africa, inflation never receded in the first place, with a reliable 50 percent of the sample and often more reporting increasing costs each quarter.
In the early days of the recovery, this has been partly due to shifting exchange rates, but inflation has persisted even as currency markets stabilized.
In the Asia-Pacific region, the share of respondents reporting rising operating costs has risen in every quarter since these surveys began, and jumped from 24 percent to 36 percent in the three months to February 2010.
In fact, every major region for which a robust sample was available showed signs on returning inflation in the first quarter of 2010.
Our findings this quarter will offer little comfort to most readers. In short, the global economic recovery appears to have run out of steam.
It is certainly encouraging that downside risks to the recovery are receding, but with these no longer obscuring the picture, the fundamental weakness of the global economy is finally plain for all to see.
This leaves no room for complacency for policy makers, who must develop a robust, forward-looking growth agenda to match their response to the downturn so far.
(The article is adapted from the latest Global Economic Conditions survey by ACCA - Association of Chartered Certified Accountants. The views are its own.)
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