Fragile economic confidence early in 2021

  • Post author:
  • Post category:Uncategorized
  • Reading time:4 mins read

South Asia showed a marked improvement in confidence and orders in Q4, after exceptionally weak Q3 survey results

Accountants and finance professional experts say economic confidence in Q4 2020 stalled and remains fragile heading into 2021, finds the latest ACCA and IMA Global Economic Conditions Survey (GECS).

Tracking confidence and fear indices, the global survey of more than 3,000 senior professionals with 201 in South Asia – including Pakistan – reflects the outlook and experiences of the thousands of businesses they advise.

The results for South Asia show:

· South Asia has been hit hard by the pandemic as economies reliant on services and tourism are prevalent in the region.

· The Q4 survey shows signs of recovery with a rise in all the main activity indicators, including orders and employment.

· But any growth revival will be fragile and subject to avoiding renewed COVID infections.

· The ‘fear’ indices – concern about suppliers and customers going out of business – fell back in Q4: the former remains elevated but the latter is close to its long-run average.

· South Asia recorded the biggest jump in orders in Q4,,recovering after a big drop in the Q3 survey.52 per cent of respondents in South Asia expect a significant economic recovery in the second half of this year or later – the highest among the major regions.

Sajjeed Aslam, head of ACCA Pakistan says: ‘The impact of COVID-19 on the global, South Asia and Pakistan economies has been significant. However, respondents across South Asia appear reasonably confident about the year ahead, looking to a recovery, perhaps spurred by policy responses and the news of vaccines being available. 2021 presents a long road to recovery ahead, and one in which accountants will be playing a key role.’

The global 2020 Q4 findings reveal the ‘fear’ indices – concern about customers and suppliers going out of business – edged lower in Q4 but remain elevated. This clearly underlines the extreme uncertainty in the global economic outlook at the start of 2021. The confidence measure fell back in North America, having surged in the previous Q3. By contrast there was a big improvement in Middle East confidence, buoyed probably by continued recovery in oil prices. Inflation concerns remain negligible with concern about costs staying close to an all-time low.

Outlook for 2021

Looking ahead, over 50% of respondents in Asia Pacific, North America and South Asia expect sustainable recovery in the second half of this year. The most optimistic in this respect is the Middle East, where 54% expect recovery during the first half of the year.

Michael Taylor, Chief Economist at ACCA says: ‘Last year was the worst for the global economy for several decades. 2021 will see recovery but precisely when and how strong it will be is very uncertain. We anticipate a weak start, followed by a recovery gathering momentum through the second half. Much depends on the evolution of the COVID virus and variants relative to the progress of vaccination programmes and there is great uncertainty surrounding these developments.

‘Since our polling in December, many countries have seen increased COVID-19 infection rates, prompting governments to re-impose restrictions including national lockdowns. This means that global economic prospects early in 2021 have deteriorated since the Q4 survey. At the same time there has been progress on the approval of vaccines, raising hopes of a permanent improvement in economic conditions later this year.’

However, ACCA and IMA highlight that, unemployment rates will be rising in many countries, potentially undermining consumer confidence and limiting the strength of a rebound.

Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research and policy, said: ‘The pandemic has forced millions into extreme poverty as emerging markets suffered recession for the first time in decades last year. Policy responses to the pandemic have left the public finances of most economies in a perilous state with budget deficits in the range of 10% to 15% of GDP in many countries with debt to GDP ratios well over 100%.’

He added: ‘All this presents a big test for policy makers in terms of when to withdraw policy support and when policy should be tightened to rebuild public finances. Policy mistakes would risk derailing economic recovery.’

Fieldwork for the 2020 Q4 survey took place between 20 November and 8 December 2020 and attracted 3086 responses from ACCA and IMA members, including over 300 CFOs.

GECS can be found here:

https://www.accaglobal.com/gb/en/professional-insights/global-economics/2020-GECS-Q4.html

 

Sharing is caring

Leave a Reply