A newly released Global Economic Conditions Survey (GECS) has shown that global business confidence rebounded in the first quarter of 2017 and is now at its highest level, indicating a prospect for Nigeria and positive outlook for Sub-Saharan Africa.
The quarterly survey of global CFOs and finance professionals, conducted by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA), has found that the prospects for Africa look positive.
Commenting on the survey, Acting head of ACCA Nigeria, Mr. Olatunji Adeleye, said, “Markets across Africa have been performing better and the outlook is positive, even though growth is likely to remain relatively weak by the standards of the past decade. The GECS survey shows confidence is at its highest rate since the second quarter of 2015, with government spending, employment and capital expenditure indices all rising in Q1.
“A key reason for this improvement in confidence is the recovery in oil prices and other commodities, which in turn has helped to lift export and government revenues, for key economies such as Nigeria. Another influence has been easing inflationary pressures, which has given central banks scope to loosen monetary policy.”
Improving economic sentiment across the world has been spearheaded by an increasingly confident outlook in North America and is reflected across leading developed and emerging markets. In particular, there has been the fastest rate of growth in global trade since 2015.
Yet the survey has found that inflationary fears are putting pressure on global economies, with nearly half (46 per cent) of firms reporting increasing costs as a cause for concern. Despite this there are significant improvements for employment and investment, with 22 per cent of firms planning to create more jobs and raise capital expenditure (up from 16 per cent and 14 per cent respectively in Q4 2016).
In response to the report Faye Chua, head of business insights at ACCA, says, “The US economy has maintained an elevated level of confidence from Q4 in 2016, with 37 per cent of firms feeling more confident, although there was no uplift from the previous quarter. An expectation of increased infrastructural spending and tax cuts has contributed to a buoyant business mood even though they are yet to materialise into policy.
“Inflation and currency fluctuations, however, are a cause for concern. 43% of US firms are troubled by rising costs and 22 per cent by exchange rate movements. Despite the Fed’s interest rate hikes, borrowing costs in the developing world remain low, and the dollar is likely to continue growing in value. That could pose a challenge to US firms’ competitiveness, and the White House’s determination to reduce the trade deficit.”
Olatunji Adeleye added that policy-makers will have an important role in the coming months, “This quarter demonstrates there are signs that the global economy is returning to a degree of health after some very tough years: the IMF is expecting global growth of 3.4% this year, the fastest rate since 2012.
“Yet in this period of fragile recovery, a number of policy interventions could have a significant impact. The new US administration has proven moderate in trade policy so far but the potential remains that a more restrictive direction could be implemented. Similarly, whilst the UK and Eurozone have so far remained unaffected by the prospect of Brexit, that could change as Article 50 negotiations begin and the French and German elections draw closer.
“How policy-makers respond to this uncertainty, and growing inflationary pressures, will be crucial over the coming months.”
The Global Economic Conditions Survey (GECS), carried out jointly by ACCA (the Association of Chartered Certified Accountants) and IMA (the Institute of Management Accountants), is the largest regular economic survey of accountants around the world, in terms of both the number of respondents and the range of economic variables it monitors.
Fieldwork for the Q1 2017 GECS took place between 24 February and 13 March 2017 and attracted 1,334 responses from ACCA and IMA members around the world, including more than 150 CFOs.