KARACHI: The latest edition of the Global Economic Conditions Survey (GECS) from the Association of Chartered Certified Accountants and Institute of Management Accountants (ACCA) reveals worries about operating costs, with warnings of future economic shocks and increased risks. Conducted just before and during the war in Ukraine, the results understandably point to economic turbulence in the coming months.

GECS’s index of concern about operating costs jumped again in the latest survey by nine percentage points and is now at its highest level on record at 62%. It tracks the effects of rising energy and transport costs caused by supply chain shortages and disruption.

In the Q1 survey, global confidence and global orders were little changed, up by four points to +9 for confidence and by two points to -3 for orders. Other economic activity indicators, such as employment and capital spending improved. Overall, the Q1 survey maintains the trend of modest overall growth through to the middle of the year, well down from the strong post-pandemic recovery of 2021. GECS’s two ‘fear’ indices – measured by concern that customers and suppliers may go out of business – were little changed in the Q1 survey, down by two points and one point respectively.

ACCA’s chief economist Michael Taylor commented: ‘The main economic effect of the Russia-Ukraine conflict has been to push oil, gas, wheat, and other commodity prices much higher. This will propel inflation to even greater heights, squeezing real incomes and slowing economic growth. Compared with previous forecasts, global growth may be reduced by as much as one percentage point this year, to around 3.25%.’

Regarding the two biggest economic risks – 51% respondents said: supply-chain disruption and 50% said renewed COVID restrictions.

We expect U.S. interest rates to rise steadily this year, and this may result in a tightening of global financial conditions. Removing the exceptional policy ease introduced to mitigate the effects of the pandemic was always going to be tricky.

Central banks in advanced economies face a difficult judgment-call that could result either in over-tight policy causing recession or too easy policy embedding inflation and inflation expectations.

Future policies need to be thought through and stress-tested.

Copyright Business Recorder, 2022


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