Dubai: Global business confidence in Q4 has dropped amid on-going political and economic uncertainty, according to the latest Global Economic Conditions Survey from the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA).
This is attributable to Government investment falling to its lowest level since the start of 2016, with many developed markets still firmly in austerity mode; changes in the political landscape stemming from the recent US election; uncertainty over US / China trade developments and last but not the least continued slump in oil prices and government spending reductions in Middle East.
The survey of over 4,500 finance professionals and business leaders worldwide has found that while the economic outlook has improved slightly in the US and China over the last quarter, confidence in the Middle East remains subdued – with 51% of firms reporting that they feel less confident about the future.
Almost half (44 per cent) of global respondents expressed concern over falling income due to low levels of government expenditure, with another 43 per cent reporting worsening business confidence.
“The fall in oil prices continues to hit the Middle East hard, creating sharp declines in export and fiscal revenues. This has caused many governments to cut back heavily on key spending projects,” Lindsay Degouve de Nuncques, head of ACCA Middle East, said.
This is particularly noticeable in Saudi Arabia, where the weakness of the government spending index has been the main driver of falling confidence. With the need to stabilise finances as well as raising interest rates to keep up with the US Fed’s tight monetary policy is placing considerable pressure on state investment.
On the other hand, the UAE’s ability to adjust quickly to changing oil revenues means that there are signs of gradual recovery. Austerity is expected to ease in 2017, and the prospect of the 2020 World Expo and Iran’s improving relationship with global trade offer encouragement for future investment. Yet while growth is set to improve this year, confidence has fallen slightly as the region’s poor performance impacts on prospects.
“Current political uncertainty is clearly having an impact on global business confidence. In the US, the Trans-Pacific Partnership is unlikely to be ratified while likely restrictions on trade with key markets including China and Mexico are also major factors here. In Europe, uncertainty over the outcome of elections in the Netherlands, France and Germany – which could lead to major policy shifts for regional trade and the future direction of the Eurozone – all contribute to a gloomy outlook going into 2017,” Faye Chua, Head of Business Insights at ACCA, said.
“The fall in confidence is part of growing uncertainty across much of the world’s biggest economies.”
“However, it is not all bad news. Despite these concerns, the global economy may be on course for growth in 2017 as China responds positively to its economic stimulus programme and the US maintains a partial recovery.”
Fieldwork for the Q4 2016 GECS took place between 24th November and 13th December 2016 and attracted 4,551 responses from ACCA and IMA members around the world, including more than 350 CFOs.