Professional accountants have reported a buoyant return to economic stability in Q2 2021, finds the latest edition of ACCA (the Association of Chartered Certified Accountants) and IMA^® (Institute of Management Accountants) Global Economic Confidence Survey (GECS).

Over 1,100 global respondents, who are members of ACCA and IMA, report an upturn in key global activity indicators, such as orders – the proxy for real economic activity. The biggest gain in Q2 came in North America, powered ahead by a massive US fiscal stimulus.

The two ‘fear’ indices – measured by concerns that customers and suppliers may go out of business – both declined in this latest survey, confirming that the extreme uncertainty created by the Covid-19 crisis has fallen back towards more normal levels.

However, despite this optimism, stark warning signs remain due to wide regional variations in confidence, with large increases across Europe, contrasting with significant falls in Asia Pacific and South Asia. As a result, ACCA and IMA ask governments and policymakers to ensure this divergence does not grow.

Michael Taylor, chief economist ACCA, says: ‘These changes reflect the speed at which vaccinations are taking place in Europe while increased Covid-19 infections are happening again in Asia Pacific and South Asia. A key theme of this GECS is the divergence in economic prospects between advanced and emerging market economies. This needs to be tackled urgently.’

Helen Brand, chief executive of ACCA, adds: ‘The world economy’s recovery to its pre-pandemic size has been driven by rapid growth in the US and China, the two biggest economies. There are many jurisdictions with plenty of ground to still make up. But the difference we see between advanced and emerging markets is glaring – and action is needed on vaccines so that there are no shortages in emerging economies.’

Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research and policy, noted that for 2021, global Gross Domestic Product (GDP) growth is likely to approach 6%, an exceptionally strong rebound after the 3.5% fall last year. This growth will be concentrated in advanced economies where levels of vaccination are now such that social distancing restrictions can be relaxed and economic conditions return to normal. Raef Lawson says: ‘This is a global pandemic, which needs global action to safeguard the health of populations and their economies – in the short and long term. For IMA and ACCA, there is a clear link in doing this to the UN SDGs, specifically Goal 1 to end poverty everywhere and Goal 8 decent work and economic growth.’

Key findings from GECS Q2 2021 reveal:

• Confidence: This fell back in North America, but this came after a very large jump in the Q1 survey. Advanced economies are now recovering, benefitting from rapid progress on vaccinations and the spending of accumulated savings.
• Orders: In Western Europe orders saw a jump, pointing to economic recovery gathering momentum in the second half of the year. Asia Pacific also reported increased orders, boosted by export demand. Elsewhere there was little change, apart from in South Asia where renewed lockdown measures have affected the economic outlook in the near term.
• Economic recovery: Most respondents in North America said that economic recovery is already underway. By contrast, over half of respondents in Africa and South Asia do not expect recovery until 2022 at the earliest. Surprisingly this was also the case in Asia Pacific. In Western Europe the proportion expecting a much-delayed economic recovery has fallen by 10 percentage points between the Q1 and Q2 survey, underlining the recent improvement in the economic outlook in the region.
• Inflation: The GECS shows respondents across regions expect a modest increase in inflation over the next five years. Compared to Q1 there has been a marked increase in inflation expectations in North America, while in Western Europe expectations are for a modest increase in inflation. The consensus across all regions is that inflation will rise modestly, by up to three percentage points in coming years.
• Operating costs: The GECS index of concern about operating costs increased and is now at its highest level since 2019 Q3. But concern remains below the level that would point to a sustained big rise in inflation.

Michael Taylor concludes: ‘Looking ahead, health and economic risks are considerable, especially if a vaccine resistant variant emerges and spreads, forcing renewed lockdown measures with consequent economic harm. Policy-wise, it’s important that fiscal support is not withdrawn prematurely, potentially causing a setback to recovery in private demand.’

GECS can be found here: https://www.accaglobal/gb/en/professional-insights/global-economics/gecs-q2-2021.html

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Helen Thompson

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