Economic confidence among finance and accounting professionals fell by 12 points in Q4 2021, due to the rapid spread of the Omicron Covid-19 strain, said ACCA recently when releasing a survey jointly conducted with the Institute of Management Accountants (IMA).
Conducted during late November and early December 2021 at the start of the Omicron outbreak, the Global Economic Conditions Survey (GECS) shows that global orders were little changed in Q4, up just one point, signalling that growth will continue at a steady pace early in 2022, the two organisations pointed out.
Survey highlights
- Other key activity indicators remain relatively little changed with the capital expenditure index up one point and employment index down by six points compared to Q3 results.
- GECS’ fear indices, which track concern about suppliers and customers going out of business, were also little changed in Q4 but are above pre-pandemic levels.
- Concerns about costs increasing again. Respondents saw this measure double over the course of 2021 indicating growing inflationary pressures in many markets around the world.
- The main risk identified was about COVID and new waves of infections with over 70% of respondents saying this was a key risk.
- Supply shortages came second, the issue already having slowed economic growth in late 2021.
- Policy tightening, either monetary or fiscal, is of less concern, along with policies to address climate change.
- Looking at specific jurisdictions, confidence fell the most in Western Europe by 28 points, which was the first region to see the rapid spread of Omicron.
- Confidence increased modestly in two regions – Asia Pacific by five points and North America by 10 points.
- Only the Middle East recorded a fall in the orders index of six points, with South Asia showing the biggest increase at +8 points.
Global GDP to grow 4%
ACCA and IMA believe that 2022 will see further progress towards a more normal economic environment with global GDP growth of around 4% despite the lower economic confidence, said Loreal Jiles, vice president of research and thought leadership at IMA.
Features of this return to normalcy include reduced household savings offsetting withdrawal of COVID fiscal support, easing of supply shortages and continued growth in levels of employment, she noted.
“While Omicron may slow economic growth through the effect on consumer spending and worker absenteeism, the impact on global economic activity should be modest and is likely to be relatively short-lived,” she estimated.
The biggest economic risk this year is that inflation, already elevated, stays higher for longer, partly because of prolonged supply shortages, ACCA said.
Upside surprises to inflation would trigger a greater degree of monetary tightening than is currently discounted by financial markets, the organisation predicted, adding that the effect would be to slow global economic growth, preventing a return to its pre-pandemic trend.
