- Confidence rose sharply in South Asia including Pakistan with only North America recording a bigger increase.
A new Global Economic Conditions Survey (GECS) of 2021 Q1 by ACCA (the Association of Chartered Certified Accountants) and IMA® (Institute of Management Accountants) found the largest jump in global confidence in the last decade, with the most positive results in North America.
The GECS, the largest regular economic survey of more than 1,000 senior accountants and finance professionals from around the world recorded the biggest jump in global confidence since the survey began 10 years ago. Between the 2020 Q4 survey conducted last December and the 2021 Q1 survey in March, there has been a significant improvement.
Confidence rose sharply in South Asia including Pakistan with only North America recording a bigger increase. A shift in gear to greater fiscal ease in India has significantly improved the economic outlook there with economic activity already having regained its pre-pandemic level. Activity indicators in the region improved but by less than the global average. There remains a legacy of tens of millions of people in the region who have fallen into poverty as a result of the COVID crisis.
The authors note that the regulatory approval of several highly effective vaccines against COVID-19 and the subsequent introduction of vaccination plans in many countries has put a permanent solution to the health crisis within reach. Activity indicators covering orders, capital spending and employment all increased to some degree in the first quarter of this year – closely mirroring the level of confidence in the last quarter of 2019 before the pandemic struck.
"Having suffered the biggest recession for several decades in 2020, the global economy is on course for a relatively quick rebound," said Michael Taylor, Chief Economist at ACCA. "The good news is that vaccination plans with continued policy support are on course to lift the global economy out of the COVID abyss this year."
Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research and policy, noted that the current path to global economic recovery differs from the financial crisis of 2007 to 2009, which resulted in a long period of subdued growth as private sector balance sheets were rebuilt through increased savings.
Said Lawson, "This crisis is different as its root cause is health and not economic. For now, global COVID-19 infections are high relative to the vaccination rate, so risks remain significant. But the huge government support provided to both households and companies over the last year leaves both well-placed to resume spending once the health crisis is over. There are likely to be permanent changes in the pattern of spending and other long-term economic consequences of the COVID crisis."
There are three factors that are heavily influencing economic prospects at present, starting with the rate of vaccinations, which can replace lockdowns to control COVID-19, thereby allowing economic conditions to return to normal. Second are major fiscal stimulus packages, such as in the U.S., which will have positive spill-over effects on other economies. Finally, particularly in advanced economies, significant savings accumulated during periods when spending was severely restricted can be a source of extra demand amid improved economic conditions.
The 2021 Q1 findings also reveal that confidence improved in all regions as did orders, with the exception of Africa. The "fear" indices - concern about customers and suppliers going out of business - showed mixed results in this survey but both remain above long run averages, underlining continued heightened uncertainty. Additionally, near-term cost concerns increased, reflecting higher commodity prices and other costs as the global economy recovers.
Further, the GECS notes that two-thirds of respondents expect higher inflation over the next five years, but there is a marked contrast between regions with North America registering higher inflation expectations than Western Europe