• Government investment falling to its lowest level since the start of 2016, with many developed markets still firmly in austerity mode
• Changes in the political landscape stemming from the recent US election
• Uncertainty over US / China trade developments
• Concerns over Brexit as well as forthcoming European Elections
The survey of over 4,500 finance professionals and business leaders worldwide has found that while the economic outlook has improved slightly in the US and China over the last quarter, the Eurozone has hit its lowest confidence levels since 2012.
Almost half (44 per cent) of respondents expressed concern over falling income due to low levels of government expenditure, with another 43 per cent reporting worsening business confidence.
Across the Eurozone the resignation of Italian Prime Minister Matteo Renzi in December 2016, combined with a series of upcoming national elections, has led to a downbeat mood while UK business confidence fell sharply ahead of Brexit negotiations.
Commenting on the findings Faye Chua, Head of Business Insights at ACCA, said:
“Current political uncertainty is clearly having an impact on global business confidence. In the US the Trans-Pacific Partnership is unlikely to be ratified while likely restrictions on trade with key markets including China and Mexico are also major factors here. In Europe, uncertainty over the outcome of elections in the Netherlands, France and Germany – which could lead to major policy shifts for regional trade and the future direction of the Eurozone – all contribute to a gloomy outlook going into 2017.
“However, it is not all bad news. Despite these concerns, the global economy may be on course for growth in 2017 as China responds positively to its economic stimulus programme and the US maintains a partial recovery.”
Raef Lawson, Vice President of Research and Policy at the IMA notes that the general picture that US confidence is holding up:
“There is a real sense that US companies are optimistic about their short-term prospects, with confidence rising for a fourth consecutive quarter. This is in part due to growing expectation of infrastructure spending and tax cuts under the new administration, but also reflects on-going improvements in economic health. Unemployment figures have fallen to pre-financial crisis levels, with 200,000 jobs added each month over the past year.
“Concerns remain however, particularly across the manufacturing sector that an appreciating dollar could impact upon future exports, driving up costs."
Faye Chua says that this research points towards a ‘new Age of Uncertainty’:
“A strengthening US dollar could have significant impacts for trade-dependent economies such as Taiwan, Hong Kong, Singapore and Vietnam as well as impact on capital investments for emerging markets such as South Africa, Colombia and Turkey. Yet emerging markets are also less dependent on the dollar than before, so we are unlikely to see a repeat of the crises of the 1990s.
“What our findings highlight is that businesses and economic forecasters feel that 2017 could mark a new Age of Uncertainty for the global economy. On a positive note, some of the underlying strengths of OECD and non-OECD economies suggest growth can be maintained and even improved over the next few years.
“However, there is no escaping that this is a challenging economic environment. There are prospects of decent growth but risks remain.”
Fieldwork for the Q4 2016 GECS took place between 24th November and 13th December 2016 and attracted 4,551 responses from ACCA and IMA members around the world, including more than 350 CFOs.
You can read a copy of the survey here http://www.accaglobal.com/uk/en/technical-activities/technical-resources-search/2017/january/global-economic-conditions-q4-2016.html
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