North America was the most confident part of the world economy in the first quarter, followed by Africa. The two least confident parts of the world economy were Central & Eastern Europe and the Middle East. 

US improvement

The US improvement in confidence is consistent with the country's actual GDP data, which shows the economy continuing to perform strongly, with unemployment at multi-year lows and wages in recovery. The biggest risk for the economy is the uncertain outlook for interest rates amid concern that the tightening labour market is leading to a rise in inflationary pressures. If the Fed tightens monetary policy too aggressively, it could cause growth to slow.

Central and Eastern Europe lows

Economic confidence in Central & Eastern Europe fell sharply in the first quarter of 2018 and is now at its lowest level since the third quarter of 2015. This is largely because of the very sharp fall in Russia, where confidence is now at its lowest level since the final quarter of 2015. 

Mixed picture in South Asia 

Confidence is positive in India, but negative in Pakistan at present. India's economy has recovered from the disruption caused by the introduction of the Goods and Service Tax and the government's demonetisation campaign, and is anticipated to grow strongly over the next year or so following buoyant private consumption and a loosening of fiscal policy ahead of general elections due next year. 

Pakistan is anticipated to face some challenges over the next couple of years. On the positive side, growth is currently being supported by investments related to the US$62bn China-Pakistan Economic Corridor, but external imbalances are building.

Asia Pacific confidence improves

Economic confidence in Asia Pacific improved in the first quarter of the year and now stands at its second highest level on record. The Asia region is the most trade-dependent part of the global economy, and with exports continuing to grow strongly, it is no surprise that confidence remains high. 

A number of countries in the region, including Thailand, Korea, Vietnam and Malaysia, are growing at, or close to multi-year highs. Confidence did however drop back in the region's biggest economy, China, amid further signs that the authorities are, for the time being at least, prioritising financial stability over economic growth.

About Narayanan Vaidyanathan, lead author, ACCA

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