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 organisations, 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.
"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," says Manos Schizas, senior policy adviser with ACCA and survey editor.
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, adds Schizas.
Schizas says that 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 notes.
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.
The Picture in Singapore
Like other small, open economies, Singapore has been particularly affected by economic trends in the last quarter. However, while respondents here have traditionally been among the most optimistic among ACCA’s major markets, in the last quarter Singapore, where there were 100 respondents, reported the biggest net loss of confidence of any major ACCA market, with 63% reporting a loss of business confidence and 80% expecting the global economy to stagnate or deteriorate further.
Demand is at the heart of this trend, with new orders falling and few new opportunities springing up in their place. As a result, investment, which had been rising in net terms until mid-2011, has also suffered.
Uniquely, respondents in Singapore were also more likely this quarter to report problems with exchange rate fluctuations.
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