KARACHI (June 22, 2010) – The threat posed by levels of sovereign debt and rising inflation to the global economic recovery has been highlighted in the worlds largest regular survey of professional accountants. The Global Economic Conditions Survey for the second quarter of 2010 by ACCA shows that, for the first time, the majority of global respondents now believe that conditions are either improving or about to.
The picture in Pakistan
Although respondents in Pakistan to the global economic conditions survey are becoming more optimistic about the prospects of the global economy, concerns about the domestic economic situation have held business confidence down, relative to the rest of the South Asian sample, with no net gains reported since the first quarter of 2010. While 60% of the Pakistan sample believed that the global economy is either recovering or about to, the majority of respondents (54%) reported that their confidence levels had remained unchanged in Q2 2010, while 23% reported confidence gains and an equal number reported losses.
Key domestic influences included a high level of inflation, with 60% of respondents reporting problems with rising operating costs, and subdued demand, which affected 57% of respondents (or their clients). The combined effect of the two has meant very subdued investment activity: the supply of capital for investment has fallen substantially as interest rates have remained high and profitable investment opportunities have dwindled.
The Global Picture
While more members worldwide are now optimistic about economic prospects, the majority of the 2,200 finance professionals responding to the survey continue to have doubts about the apparent improvements.
The slowdown in Asia has continued for a second consecutive quarter, and Africa, which had been performing strongly until recently, now appears to be following suit. ACCA believes much of this slowdown is down to a weak recovery in Europe and the US and to monetary contraction in China, which has now continued for two quarters in a row.
The recovery in Western Europe, which had stalled in early 2010, has now gone into reverse as fears about sovereign debt and the future of the Eurozone weigh on finance professionals' minds.
Although investment is still low, business investment bounced back faster in the second quarter of than at any time since the downturn began, driven by both the incidence of profitable investment opportunities and improvements in the supply of finance.
But the survey shows that time may be running out for business people to capitalise on the conditions created by the downturn with business opportunities appearing to have peaked in the third quarter of 2009.
The full report can be accessed on the following link: