The Global Economic Recovery is Over - Say Finance Professionals

By Acca association Of Chartered Certified Accountants, PRNE
Wednesday, October 5, 2011

LONDON, October 6, 2011 -

Any signs of a recovery in the global economy have disappeared, according to the largest ever survey of finance professionals to be undertaken by ACCA (the Association of Chartered Certified Accountants).

The report stresses that, while the economic situation is tough, the constant flow of depressing headlines may be making finance professionals even more pessimistic than conditions actually justify.

Three quarters of the 2,873 professionals who took part in the Global Economic Conditions Survey between 19 August and 7 September 2011 thought global economic conditions were deteriorating or stagnating. Nearly half, (49%) had lost confidence in the economic prospects of their own organizations, while a similar percentage (45%) thought their governments were not dealing correctly with current economic challenges.

ACCA believes that much of the drop in confidence, especially in Europe and the Asia-Pacific region, is down to a flow of bad news rather than the economic fundamentals, which have deteriorated only slightly in the past three months.

Manos Schizas, senior policy adviser with ACCA and survey editor, said:

” The weakening in demand and deteriorating access to finance reported by accountants were not sharp enough to justify the strong negative sentiment which they expressed. But after taking into account the effects that fear for the future will have on their views, the evidence still points to falling economic activity in the developed nations and a sharp slowdown in emerging economies.

The drop in confidence could be seen as a result of people waking up to trends which have accumulated for the past year or more. Globally, demand has proven to be too weak to sustain reliable growth, investment refuses to pick up and inflation remains high. And on top of everything else, it’s still unclear whether the sovereign debt crisis in Europe can be contained, or indeed what it will mean if it cannot,” he said.

Although all regions except the Middle East are now in negative territory in terms of both economic and business confidence, ACCA is particularly conscious of developments in the Asia-Pacific region, which once led the world into recovery. After falling steadily for more than a year, confidence levels in the region are now comparable to, if not lower than, those in Europe, and economies which undertaken more international trade (such as Singapore or Hong Kong) appear to be the worst hit.

An economic picture influenced by global headlines

The evidence from the UK sample of 876 accountants suggests that Britain is underperforming the rest of Europe, with more than half of the sample (51%, up from 38% in the last quarter) reporting a loss of confidence. The clear majority of respondents (84%, up from 72%) thought economic conditions globally were deteriorating or expected the global economy to stagnate.

However, ACCA notes that developments on the ground do not fully justify this level of pessimism. While demand in general continues to weaken, access to finance and cashflow conditions are not deteriorating and capital spending is still holding up. In fact, ACCA believes that after accounting for the effects of poor newsflow, the readings are consistent with only a mild contraction in economic output for this quarter.

With the economy moving into more dangerous territory, ACCA examined members’ views on fiscal policy. Overall, respondents now expected a new wave of austerity measures in the medium term. While many were comfortable with government erring slightly on the side of austerity, such attitudes depended strongly on accountants’ expectations of future economic growth.

Africa has traditionally been the region in which GECS respondents tend to be the most optimistic. Although the continent still leads the other ACCA regions for economic optimism and lags only the Middle East for business confidence, it is now in negative territory on both counts. A large share of the 396 respondents (44.3%, up from 31.5%) in Africa reported loss of business confidence in the last quarter, and for the first time more respondents (51%) in Africa feel that the global economy is deteriorating or stagnating than not.

Respondents in China and particularly in Hong Kong have been affected by the deteriorating economic environment. More than half (52% in mainland China and 59% in Hong Kong, up from 43% and 24% respectively) reported a loss of confidence in the prospects of their own organisations. Over two thirds (76%) of the combined sample of more than 200 accountants believed that global economic conditions were deteriorating or stagnating, almost double the percentage (34%)  three months ago.

The full report can be accessed here:

For further information, please contact:
Laura Strong, ACCA Newsroom


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