The global economic recovery has once again run out of momentum, according to the latest findings from the largest regular economic survey of finance professionals around the world.
The Global Economic Conditions Survey organised by ACCA (the Association of Chartered Certified Accountants) and IMA (the Institute of Management Accountants) showed that business confidence fell marginally in Q2 2014, and is becoming increasingly reliant on financial stability. The two bodies believe that this is a sign of mounting risks for the future of the recovery.
Although the change in business confidence between Q1 and Q2 2014 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.
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.
On a country-by-country basis, it is clear that much of the recovery in business confidence is temporary. For instance, encouraging figures in China and Russia were boosted by the signing of a series of major long-term trade and investment deals, while fieldwork closed before the loss of flight MH17 and its aftermath, which will certainly depress confidence in Central and Eastern Europe in Q3.
Despite relatively good news from the real economy, the survey also revealed that the first half of 2014 had been a very depressing time for major Western banks, and became more so in the second quarter. GECS figures for large financials in the US and Europe suggest that confidence in the sector retreated sharply in anticipation of tougher stress tests, rising interest rates and falling property prices, geopolitical risks and the threat of tougher regulatory enforcement.
Manos Schizas said: 'After a year of solid improvement in 2013, it’s clear that 2014 is not going to be anywhere near as benign for the global economy. Many of the sources of good news in 2013 – including large financials and ‘austerity survivors’ such as the UK and Ireland – are turning negative again. The Chinese slowdown, which has been a constant drain on the global recovery, may be coming to an end, but the looming geopolitical risks in Eastern Europe and the Middle East are likely to prove just as damaging in the medium term.'
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Notes to Editors
- ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
- We support our 170,000 members and 436,000 students in 180 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of 91 offices and centres and more than 8,500 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence.
- Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. We believe that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. Our values are aligned to the needs of employers in all sectors and we ensure that through our qualifications, we prepare accountants for business. We seek to open up the profession to people of all backgrounds and remove artificial barriers, innovating our qualifications and delivery to meet the diverse needs of trainee professionals and their employers.