Indian economy recovers from year-end blip amid global confidence surge, finds ACCA

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Mumbai: Business confidence in India has increased in the first quarter of 2017 as the economy recovers from an end of the year dip, according to the latest edition of the Global Economic Conditions Survey released by the Association of Chartered Accountants (ACCA) and IMA (the Institute of Management Accountants).

The quarterly survey of global CFOs and finance professionals has found that global economic sentiment has risen to its highest levels since 2015 amid promising signs of a sustained recovery. The rise 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.

Commenting on the findings Mmd Sajid Khan, head of international development at ACCA, says, “While the demonetisation campaign caused a slowdown in economic activity – which was a risk understood at the time – the increase in confidence this quarter reflects the underlying strength of the Indian economy. Confidence looks set to improve as businesses benefit from the government’s recent economic reforms – although securing prompt payment for small businesses remains an important priority.”

Faye Chua, head of business insights at ACCA, says that the global economy has so far proven resilient in the face of multiple policy challenges. “The rise in confidence, combined with strong economic hard data, offers genuinely encouraging signs for the global economy: with an increasingly optimistic mood in the US and a stimulus-led recovery in China driving prospects for world trade.

“This strong start to the year has taken place against a backdrop of potential threats facing the world economy at the start of 2017. There have been uncertainties over the future of US trade policy under the new administration, the potential of a Eurozone banking crisis during a key election year across Europe and the UK’s triggering of Article 50 to begin the process of leaving the EU. Yet many of these fears have yet to be realised, and the prospect of increased government spending as austerity measures come to an end in many developed economies means that short term prospects look bright. These are the clearest signs of a synchronised and sustained recovery since 2011, and we can reasonably expect that to continue over the next two quarters.”

Yet the survey has found that inflationary fears are putting pressure on global economies, with nearly half (46%) of firms reporting increasing costs as a cause for concern. Despite this there are significant improvements for employment and investment, with 22% of firms planning to create more jobs and raise capital expenditure (up from 16% and 14% respectively in Q4 2016).

Faye Chua adds that policy-makers will have an important role in the coming months, “This quarter demonstrates that 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.