A global survey of more than 1,000 senior accountants reveals an improvement in optimism in Q3 after a torrid first half of the year which saw confidence at record lows. Activity measures, such as orders, capital spending and employment, also improved in the latest survey but only modestly - they remain at low levels consistent with the global economy operating well below the pre-COVID-19 level into 2021.
Specific COVID-19 related questions also show increasing expectations from respondents that significant economic recovery will be pushed well into 2021.
But GECS Q3 comes with stark warning signs as results point to the weak and precarious state of the global economy in the latter part of 2020.
Commenting on the findings, Michael Taylor, ACCA’s chief economist says: ‘Despite the jump in confidence, the overall message from the GECS is still one of weakness with the global economy on course this year for its largest peace time contraction since the 1930s.’
The report Global Economic Conditions Survey (GECS), jointly published by ACCA (Association of Chartered Certified Accountants) and IMA® (Institute of Management Accountants) reveals:
‘The nature and prolonged duration of the COVID-19 shock means that it is likely to result in permanent changes to the structure and potential growth rates of economies,” said Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research and policy.
‘Higher private sector savings may be one outcome: households and companies limit consumption and investment respectively as they remain cautious in the face of extreme uncertainty. This suggests that the public sector may have to run significant fiscal deficits for some time in order to support overall demand. For now, at least mounting public sector debt can be sustained since interest rates are exceptionally low.’
Looking ahead to 2021, Michael Taylor concludes: ‘The Q3 recovery has been driven mainly by the consumer, where the rebound in retail sales has been especially strong. But our view is that the consumer will lose momentum in coming months and into 2021.Increasing, COVID infections in some countries and continued social distancing measures everywhere will undermine consumer confidence and spending. In addition, fiscal support is being scaled back in many cases, contributing to a rise in unemployment. World GDP is not likely to regain its pre-crisis level until at least the second half of 2022.
‘The nature and duration of the COVID-19 economic shock is such that it is likely to result in permanent changes to the structure of economies and to the trend rate of economic growth. Households and companies may well increase their savings rates, hampering private sector demand. This means that the public sector may have to run significant fiscal deficits for the foreseeable future in order to support overall demand.’
GECS Q3 2020 can be found online here.
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