The latest edition of the Global Economic Conditions Survey (GECS) from ACCA (the Association of Chartered Certified Accountants) and IMA® (Institute of Management Accountants) found confidence in the economic outlook remaining well below the median reading over the past decade due to fears over inflation and a slump in business.
Globally, the survey found that nearly three-quarters of businesses are wrestling with increased costs, with the highest proportion of respondents reporting increased cost pressures for the last decade and over one in three worried about decreased income, with a similar proportion highlighting foreign exchange volatility as uncertainty and glimpses of recession dominate the latest economic outlook.
Two developments underlined the precarious nature of the commercial environment. First, an increase in the number of respondents reporting “problems securing prompt payment,” which has risen to the highest level in four years. This could be the first sign of an increase in the number of organizations that may be experiencing cash-flow difficulties. Additionally, the survey found that there has been a noticeable rise in the numbers reporting “problems accessing finance,” with the most aggressive tightening of monetary policy in 40 years likely to hit corporate liquidity.
The data further notes confidence in the economic outlook remaining well below the median reading over the past decade, while the other three indicators that are more closely related to economic activity – new orders, capital expenditure, and employment – all show a further deterioration. Taken as a whole, the series is consistent with slower global growth for the remainder of the year, coupled with inflationary pressures rising.
“Growing concern of increased interest rates in response to higher inflation and the result in tightening policy lies the risk where the global economy could slow more than businesses expect in 2023,” said Dr Josh Heniro, senior director of Southeast Asia at IMA. Commenting on the outlook for the Asia Pacific, he added, “The silver lining in the Asia Pacific market is that monetary policy has remained accommodative where the surge in inflation is within acceptable parameters in comparison with other regions, which could be the reason why we are seeing a recovery of confidence among our respondents.”
The survey also notes the growing divergence in confidence levels across the regions, with low levels in North America and Western Europe contrasting with the more upbeat perspective among the survey’s Middle Eastern and South Asian respondents.
The findings in North America illustrate the impact of rising inflation and the global economy. After collapsing to a record low in Q2, North American confidence recovered slightly in Q3, but it is still the second weakest reading in the survey’s history. Even more worrying is that new orders, capital spending, and employment all deteriorated in Q3.
“Our latest Global Economic Conditions survey points to obvious ongoing challenges in the global economy, a reflection of the continued economic fallout from the Russian invasion in Ukraine, a further tightening of monetary policy in key jurisdictions, and a cost-of-living crisis,” Jamie Lyon, head of skills, sectors and technology at ACCA said. “One of the key risks will be how much and how quickly central banks will seek to further tighten monetary policy in the months ahead to tame inflationary pressures, and whether or not the global economy could slow more than business leaders expect in 2023.”