A global survey of more than 1,000 senior accountants reveals an improvement in optimism in Q3 after a torrid first half of the year which saw confidence at record lows. Activity measures, such as orders, capital spending and employment, also improved in the latest survey but only modestly - they remain at low levels consistent with the global economy operating well below the pre-COVID-19 level into 2021.

Specific COVID-19 related questions also show increasing expectations from respondents that significant economic recovery will be pushed well into 2021.

But GECS Q3 comes with stark warning signs as results point to the weak and precarious state of the global economy in the latter part of 2020.

Commenting on the findings, Michael Taylor, ACCA’s chief economist says: ‘Despite the jump in confidence, the overall message from the GECS is still one of weakness with the global economy on course this year for its largest peace time contraction since the 1930s.’

The report Global Economic Conditions Survey (GECS), jointly published by ACCA (Association of Chartered Certified Accountants) and IMA^® (Institute of Management Accountants) reveals:

• Global confidence jumped to a three-and-a-half year high, although this reflects the change in confidence compared with June when many economies were in varying degrees of lockdown.
• There was a slight reduction in concerns that customers and suppliers may go out of business, but they remain at extremely high levels
• The orders indices in North America and Western Europe recovered by the largest margin in Q3. Lifting of lockdowns in these regions, especially from July onwards has lifted their economies and the orders balance reflects this and points to continued recovery. There is little variation across regions, with South Asia a relatively weak outlier.
• For access to finance the pattern is the same in the latest survey as in June 2020. More generous government support and guarantees mean that firms in North America and Western Europe have better access to finance than those in Emerging Markets.
• Expectations of substantial economic recovery have shifted decisively towards later in 2021 over the last three months. Over 60 per cent of respondents in Western Europe are now of this view, and more than 50 per cent in Asia-Pacific and North America too. South Asia has the highest percentage not expecting recovery until 2021 Q1 or after.

‘The nature and prolonged duration of the COVID-19 shock means that it is likely to result in permanent changes to the structure and potential growth rates of economies,” said Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research and policy.

‘Higher private sector savings may be one outcome: households and companies limit consumption and investment respectively as they remain cautious in the face of extreme uncertainty. This suggests that the public sector may have to run significant fiscal deficits for some time in order to support overall demand. For now, at least mounting public sector debt can be sustained since interest rates are exceptionally low.’        

Looking ahead to 2021, Michael Taylor concludes: ‘The Q3 recovery has been driven mainly by the consumer, where the rebound in retail sales has been especially strong. But our view is that the consumer will lose momentum in coming months and into 2021.Increasing, COVID infections in some countries and continued social distancing measures everywhere will undermine consumer confidence and spending. In addition, fiscal support is being scaled back in many cases, contributing to a rise in unemployment. World GDP is not likely to regain its pre-crisis level until at least the second half of 2022.

‘The nature and duration of the COVID-19 economic shock is such that it is likely to result in permanent changes to the structure of economies and to the trend rate of economic growth. Households and companies may well increase their savings rates, hampering private sector demand. This means that the public sector may have to run significant fiscal deficits for the foreseeable future in order to support overall demand.’

GECS Q3 2020 can be found online here.

- ends -

For media enquiries, contact: newsroom@accaglobal.com

+44 (0)7725 498 654 or @ACCANews

About ACCA

ACCA is the Association of Chartered Certified Accountants. We’re a thriving global community of 227,000 members and 544,000 future members based in 176 countries and regions that upholds the highest professional and ethical values.

We believe that accountancy is a cornerstone profession of society that supports both public and private sectors. That’s why we’re committed to the development of a strong global accountancy profession and the many benefits that this brings to society and individuals.

Since 1904 being a force for public good has been embedded in our purpose. And because we’re a not-for-profit organisation, we build a sustainable global profession by re-investing our surplus to deliver member value and develop the profession for the next generation.

Through our world leading ACCA Qualification, we offer everyone everywhere the opportunity to experience a rewarding career in accountancy, finance and management. And using our respected research, we lead the profession by answering today’s questions and preparing us for tomorrow. Find out more about us at accaglobal.com

About IMA^® (Institute of Management Accountants)
IMA®, named the 2017 and 2018 Professional Body of the Year by The Accountant/International Accounting Bulletin, is one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA® (Certified Management Accountant) and CSCA® (Certified in Strategy and Competitive Analysis) programs, continuing education, networking and advocacy of the highest ethical business practices. IMA has a global network of more than 125,000 members in 150 countries and 300 professional and student chapters. Headquartered in Montvale, N.J., USA, IMA provides localized services through its four global regions: The Americas, Asia/Pacific, Europe, and Middle East/India. For more information about IMA, please visit www.imanet.org.