Nearly three quarters of business are wrestling with increased costs, the highest proportion of respondents reporting increased cost pressures for the last decade and over one in three are worried about decreased income, according to the latest edition of the Global Economic Conditions Survey (GECS) from ACCA (the Association of Chartered Certified Accountants) and IMA® (Institute of Management Accountants) with a similar proportion highlighting foreign exchange volatility as uncertainty and glimpses of recession dominate the latest economic outlook.
South Asia recorded an improvement in confidence, new orders, and capital expenditure. Although the region has faced similar macro headwinds as the rest of the world, including higher inflation and a tightening of monetary policy, it has proved relatively resilient. Confidence levels remain in line with the median of the past decade. Moreover, the rise in the new orders component in the latest survey takes it to the highest level seen in more than seven years.
Two developments further 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 organisations that may be experiencing cash-flow difficulties. At the same time, 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 also shows confidence on 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 showed a further deterioration. Taken as a whole, the series are consistent with slower global growth for the remainder of the year, coupled with inflationary pressures rising.
Assad Hameed Khan, head of ACCA Pakistan, said: ‘Our latest Global Economic Conditions survey points to obvious ongoing challenges in the global economy, a reflection of the continued economic fallout from the Russia-Ukraine situation, a further tightening of monetary policy in key jurisdictions including Pakistan and a cost-of-living crisis. One of the key risks will be how much and how proactively central banks seek to provide responsive policies in the months ahead to tame inflationary pressures and ease forex pressures, and whether or not the global economy could slow more than business leaders expect in 2023.’
Loreal Jiles, vice president of research and thought leadership at IMA added: “For most regions in the world, the GECS survey points to a decline in business orders both in comparison to the previous quarter, and looking across the new orders index over the past year. Coupled with inflationary pressures, it suggests a challenging time for businesses ahead in the next few months.”
The Global Economic Conditions Survey (GECS), carried out jointly by ACCA (the Association of Chartered Certified Accountants) and IMA (the Institute of Management Accountants), is the largest regular economic survey of accountants around the world, in terms of both the number of respondents and the range of economic variables it monitors.
The GECS has been conducted for over 10 years. Its main indices are good lead indicators of economic activity and provide a valuable insight into the views of finance professionals on key variables, such as investment, employment and costs.
Fieldwork for the 2022 Q3 survey took place between 2 and 14 September 2022 and gathered 905 responses; 584 from ACCA members and 321 from IMA members.
ACCA and IMA would like to thank all members who took the time to respond to the survey. It is their first-hand insights into the fortunes of companies around the world that make GECS a trusted barometer for the global economy.