Damage to economies around the world will be huge, as all regions struggle in the wake of Covid-19, ACCA and IMA find
A global survey of nearly 900 senior accountancy practitioners, reflecting the outlook of thousands of businesses they advise, reveals confidence has fallen by 13% to -45, representing a record low in the 11-year history of the research.
The Global Economic Conditions Survey (GECS), jointly published by ACCA (Association of Chartered Certified Accountants) and IMA® (Institute of Management Accountants) reveals:
- Global confidence fell to its lowest level on record with big falls in all regions
- The global orders index, which tends to be less volatile than confidence, also fell sharply
- Asia Pacific confidence is the lowest among all regions and the orders balance fell by more than anywhere else in Q1
- The regional index of concern about suppliers going out of business jumped to a record high of 22 in Q1 compared with a long run average of 8
Michael Taylor, ACCA’s chief economist at ACCA, reveals there is relatively little divergence in confidence between regions owing to the global nature of the coronavirus economic shock.
He says: ‘Confidence fell everywhere and, in most cases, sharply and to the lowest since the survey began in 2009.
‘The Q1 drop in Asia Pacific confidence is less than the global average, but confidence here was already relatively weak as a consequence of US-China trade tensions. Hence it took less of a drop to reduce Asia Pacific confidence to the lowest among all regions. Western Europe and the Middle East have only a slightly higher confidence level.
‘The orders balance is closer to real economic activity than sentiment-driven confidence. The falls in orders may be less extreme than for confidence, but nevertheless are across the board.
‘The regional pattern reflects the geographical spread of Covid-19 at the time of the Q1 survey with the biggest fall in Asia Pacific and the smallest drop in Africa.’
Mr Taylor is warning of significantly lower levels of economic output to come in the immediate future. ‘Early data releases, such as US jobless claims and monthly activity surveys in the US, euro-zone and UK point to plunging levels of economic output,’ he says.
‘Emerging market economies face additional difficulties as a flight to quality among investors triggers capital outflows.’
Raef Lawson, IMA vice president of research and policy, says: ‘In normal circumstances, economic conditions change little in the space of just a few weeks. But these are not normal circumstances.
‘So, although global confidence and orders both fell significantly in the Q1 survey, they do not convey the true scale of the global economic contraction that is now in progress.
‘What is abundantly clear is that the global economy is heading into a recession, initially at least a severe one.’
Looking ahead, Michael Taylor concludes: ‘The economic damage in coming months will be huge. But if appropriate policy action is taken, then conditions for recovery will be in place when the Covid-19 health crisis is substantially over.’