The global economy is bouncing back in terms of confidence, orders, employment and spending, according to the latest ACCA and IMA Global Economic Conditions Survey (GECS).
The survey of senior accountants and finance professional across the world recorded the biggest jump in economic confidence this quarter in the 12 years it has been running. The balance of those more optimistic minus those less optimistic increased by 26 points in this survey.
The GECS is consistent with the view that the global economy stands a good chance of reaching its pre-pandemic level of activity later this year.
The results for South Asia – including Pakistan – point to much improved levels of confidence, reflecting better domestic and global demand prospects. As a result, confidence rose sharply in South Asia with only North America recording a bigger increase. But latest spike in Covid-19 cases in India and Pakistan has further muddled the economic outlook for economies in the region.
When asked about the prospect of higher inflation, there is a marked contrast between the relatively high expectations of respondents in South Asia, Africa and North America and rather lower expectations in Western Europe.
Across South Asia, 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-19 crisis.
Sajjeed Aslam, head of ACCA Pakistan, comments: ‘Different levels of economic prospects in the largely optimistic global picture are attributed to three factors that heavily influence the economy – the rate of vaccinations, the amount of government fiscal stimulus and savings banked by individuals during restrictions and lockdowns.’
Michael Taylor, chief economist at ACCA, said of the global picture: ‘This survey paints a much brighter picture with confidence jumping by the most in the history of the survey. The approval and deployment of several effective vaccines has dramatically improved the prospects of an end to the Covid crisis. A very large US fiscal stimulus has also boosted global economic prospects this year.’
‘The global orders index also increased in the Q1 survey and is consistent with further recovery in the global economy into the second half of 2021. We now expect global economic activity to return to its pre-Covid level from Q4 2019, later this year.’
The global picture
The survey also reported some more mixed results. The ‘fear’ indices, which track concern about customers and suppliers going out of business, are still above long-term averages, reflecting continued uncertainty.
And near-term cost concerns increased, to a balance of 33 in Q1 from 24 in the previous survey, reflecting higher commodity prices and other costs, as the global economy recovers. But cost concerns are still below their long-run average.
The prospect of a strong economic rebound has also raised questions about the possibility of sustained increases in inflation, with two-thirds of global respondents saying they expect it to rise within five years.
However, the report concludes that the effect of the recessions of 2020 will keep a lid on inflation for the next year in most countries, with an expected steady rise in the next three to five years. In the USA, predicted strong economic growth this year, could lead to inflation much quicker.