Global Recovery In Reverse, Say Accountants

Online, November 15, 2010 (Newswire.com) - The fragile global recovery has gone into reverse in the last three months, with investment and business confidence suffering a serious setback, according to the latest quarterly survey of finance professionals by ACCA (the Association of Chartered Certified Accountants). ACCA believes that governments' gradual withdrawal of support for investment over the past nine months is now beginning to tell as demand and financing conditions weaken once again.

Contrastingly, Singapore is the only major ACCA market in which accountants have never rated government policies as 'very poor' since the surveys began. It is the only major market to report accelerating gains in business confidence this quarter.

The picture in Singapore

Singapore once again emerged as the most optimistic of ACCA's major markets, with nearly two thirds (72%) of the 109 respondents in Singapore believing that the global economy is either recovering or about to do so. It was also the only major market to report accelerating gains in business confidence this quarter, with just over half (51%) of respondents saying they were more confident about their organisations' prospects than they were three months ago, and another 38% reporting no change.

Rising inflation and operating costs was once again the most commonly cited problem among professionals in Singapore, reported by 40% of the national sample. Inflationary pressures were broadly in line with those other markets in the Asia-Pacific region. This quarter's survey also saw a jump in the number of respondents reporting problems with late payment (from 14% to 26%) and difficulties accessing finance (from 20% to 29%), an indication of deterioration in financing conditions as the recovery gathers pace.

However, respondents also saw opportunities in the current economic conditions - most often opportunities for stronger co-operation across the supply chain (26%), international expansion (24%) and investment in quality (19%).

Satisfaction with government policies has been much higher here than in any other ACCA market since the beginning of the downturn in 2008-9, and this trend continued in Q3 2010, with 72% of respondents saying they thought the government's response was 'good' or 'very good'. Singapore is the only major ACCA market in which accountants have never rated government policies as 'very poor' since the surveys began.

Government spending is expected to rise strongly in the medium-term, with 54% of respondents expecting a 'moderate' rise and another 17% expecting a 'substantial rise' in public spending over the next 5 years. With robust growth and no public debt to speak of, Singapore's public finances are much less of a balancing act than those in other ACCA markets - only 2% of respondents expected dangerous levels of over-spending or under-spending in the medium-term. In fact, a mild under-spend was seen as more likely than an overspend.

The Global Picture

Nearly half (49%) of the 1,895 professional accountants surveyed by ACCA believe that conditions are stagnating or deteriorating, and for the first time in the survey's two years, ACCA's key economic and business confidence indicators have not pointed towards improving conditions.

Crucially, the report says, the outlook for new orders has weakened in the last three months and more respondents are now reporting concerns about whether their suppliers can continue to be viable. Inflation continued to rise in the last quarter, with 35% of respondents seeing an increase in their operating costs, while slightly more accountants reported that their firms and clients could not get vital finance from banks and other lenders than three months ago.

While ACCA has warned that it is too early to tell whether any particular economies are about to suffer a renewed downturn, it expects that the next quarter's figures will show whether we are dealing with a temporary 'pause for breath' or something much more dangerous. The probability of the latter is reinforced by a sharp deterioration in the survey's investment indices.

Accountants based in Western Europe believe that their governments will reduce spending substantially over the next five years, and those in the Americas are slowly coming to anticipate some measure of austerity as well. On the other hand, ACCA members in Africa and Asia expect public spending to rise substantially. Of those, members in the Asia Pacific region are much more confident that their governments can afford increased levels of spending, while those based in South Asia and Africa expect a tough balancing act ahead.

Commenting on the global picture, report author Manos Schizas, senior policy adviser with ACCA, said: "The latest survey marks a turning point in the economic recovery: weakening demand, tightening finance, loss of confidence and slowing investment. It doesn't look good and almost no part of the world is unaffected."

"On the other hand, there are still reasons to be optimistic. In the midst of all this, members are reporting more opportunities for their organisations and their clients; not to cut costs, but to expand and add value. That, plus the ever-decreasing reliance on government support, can only be good news," he added.