A report was released by the ACCA, which can be accessed online. It was summarised thus:
- Latest quarterly global survey from ACCA and IMA reveals a subdued sentiment, with many more firms scaling back investment
- Dip in confidence across the OECD linked to Brexit uncertainty, which is set to continue as the UK commences a complex multi-year process to extricate itself from the EU
- Pakistan-China Trade Corridor drives clear rise in confidence for market
- OECD woes partially offset by improvements elsewhere with China looking less likely to suffer a large currency devaluation, and the US enjoying healthy consumer confidence and unemployment figures
The latest Global Economic Conditions Survey from ACCA and IMA, released recently, offers an early indication of how uncertainty will effect OECD economies, with business confidence subdued despite an improving global outlook. Responding to the findings, Faye Chua, ACCA head of business insights, said:
“Fears of global recession seem to have eased over the past quarter as China’s currency stabilises, the US enjoys a consumer-led recovery and commodity prices have started to rise. Yet low levels of confidence across Europe in the run-up to the UK referendum has offset some of those fragile gains as jittery markets from the US, UK and across the emerging world suffer declines”
Nonetheless, Faye Chua sees reasons to be positive for Pakistan:
“There was a clear rise in confidence in Pakistan in the second quarter, after it was dragged down in Q1 by security problems – most notably the attack on Lahore in March. Businesses have continued to benefit from a series of aggressive rate cuts since 2014 – the most recent of which was made in late May.
The eventual implementation of the Pakistan-China Economic Corridor, a bilateral project that will involve hefty Chinese investment into Pakistan’s infrastructure network, will also create opportunities for local firms.”
Faye Chua adds that there has been an improvement in global confidence outside of OECD countries:
“GECS showed that business confidence picked up a little, having hit a four-year low in the first quarter. The number of firms that said their prospects have deteriorated over the past three months fell to 43%, in Q2, from 48% in Q1.
Much of the global improvement has come from outside the OECD. Recent price rises have bolstered commodity-producing countries, especially in Africa and the Middle East, and this has in turn increased expectations of government spending.”
Yet Faye Chua also argues there are causes for concern,
“Although there has been a slight rise in confidence it is yet to translate into meaningful increases in capital expenditure and employment indices. Half of firms are still either cutting or freezing employment, while only 13% are increasing investment in staff. Only 16% of businesses reported they are increasing investment in capital projects, compared with 41% that said they are reducing it.”
Faye Chua anticipates the potential impact of Brexit will be felt globally for the foreseeable future:
“It would not be a surprise if business sentiment fell again in Q3. And the potential for long-term uncertainty as the UK negotiates its complex departure from the European Union could weigh down on global confidence for some time to come”
Fieldwork for the Q2 2016 GECS took place between 3 and 20 June, and attracted more than 1,200 responses from ACCA and IMA members around the world, including more than 130 CFOs. Nearly half the respondents were from small and medium enterprises, with the rest working for large firms of more than 250 employees.
The full report can be viewed in the online version of this article.
