KARACHI: Weak growth appears to be the most likely outcome for the remainder of 2022, according to the latest edition of the Global Economic Conditions Survey (GECS) from the ACCA (the Association of Chartered Chartered Accountants) and the IMA® (Institute of Management Accountants).
The second quarter Global Economic Conditions Survey (GECS) – conducted in mid-June – highlighted a decisive deterioration in the global economic outlook due to the effects of the war in Ukraine and soaring inflation. in much of the world.
But while the risks have increased, all indications are that a global recession will be avoided. However, while the confidence of financial professionals has fallen sharply, the level remains above the low point reached at the height of the COVID-19 pandemic.
Both ‘fear’ indexes – reflecting the level of worry that customers and suppliers might go out of business – were little changed in the Q2 survey, both slightly higher. Both indices have retreated from the extreme levels seen in 2020, but are still above pre-pandemic levels.
The largest decline in confidence occurred in the Middle East, a region more exposed to trade with Russia/Ukraine, while North America and Western Europe saw particularly large declines due to sharp rises in inflation in recent months.
Elsewhere, the declines in confidence are still significant, but more modest (see graph 1). Only in North America has confidence returned to the levels seen during the COVID-19 pandemic in 2020.
While the outlook has darkened, the decline in confidence is much larger than that in orders. In fact, orders – a leading indicator of economic activity – are above their long-term average. The employment index is also well above its long-term average, despite a drop in the second quarter. Labor markets are tight and employment is rising in many economies, partly offsetting the effects of high inflation on real incomes.
In a list of top concerns since the first-quarter survey, finance professionals traded worries about COVID for worries about inflation and rising interest rates. But for the third consecutive GECS, supply shortages and supply chain issues remained the highest risk. Hopes are that this issue would become less important as this year progressed.
Jamie Lyon, Head of Skills, Sectors and Technology at ACCA, said: “The post-pandemic recovery has now given way to negligible economic growth, high inflation and extreme uncertainty. The war in Ukraine has given a new boost to inflation by pushing up commodity prices But inflation was already high and rising before the start of the war in February: a strong rebound in demand fueled by a monetary and fiscal response response to the Covid pandemic had run into supply shortages, leading to a spike in price pressures.
Loreal Jiles, Vice President of Research and Thought Leadership at IMA, added: “High inflation leads to lower real disposable incomes, which puts downward pressure on private demand, particularly household consumption. Food and energy prices are rising rapidly The result is a crisis in the cost of living for low-income households in advanced economies and in virtually all low- and middle-income countries, where these two categories represent a large share of expenses.
Copyright Business Recorder, 2022
