Credit crunch has knocked Asia-Pacific business confidence, says survey

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KUALA LUMPUR: The Asia-Pacific region has suffered a significant loss of business confidence after nine months of relative buoyancy, according to the Global Economic Conditions Survey (GECS), the largest regular survey of finance professionals around the world.

The survey, jointly done by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA), found that 48% of its respondents reported a loss in business confidence in the region, up from 37% in the previous quarter.

Comparatively, only 15% of respondents polled reported a confidence gains in the region, which is down from the 24% reported in the previous quarter.

The survey also uncovered a number of worrying trends, namely a growing reliance on government spending, fears of deflation in developed markets, and a synchronised fall in capital spending around the globe.

“It is clear that the buoyancy of the financial sector has masked the true picture in the real economy, where despite growth capital being at its most accessible since the global economic crisis, the lack of genuine business opportunities has meant that investment has been subdued around the world,” ACCA’s senior economic analyst Mans Schizas said in a press release yesterday.

Tightening conditions are, to some extent, to blame for the recent poor confidence readings, the same statement read.

Although business opportunities held up reasonably well and access to finance tightened only marginally, respondents in the region reported a severe tightening of business cash flow. Investment opportunities were also down significantly quarter-on-quarter, continuing a persistent medium-term trend, the statement further read.

Nevertheless, Schizas, the author of the survey report, sees cause for optimism.

“There is hope for stability going forward. Prices and exchange rates [have] continued to stabilise, and businesses in the region continued to add capacity, building on a strong two-year trend,” he said.

“Unlike business confidence, the macroeconomic outlook for the region remained stable in the third quarter of 2014, with 39% of respondents believing conditions were improving, and 54% pessimistic about the recovery. Both figures were unchanged quarter-on-quarter,” Schizas observed.

Globally, GECS found that business confidence in the real economy and capital spending have both taken a direct hit. Both IMA and ACCA warn that only the continued strength of financials and selected emerging markets helped maintain the illusion of recovery.

The third quarter of 2014 GECS findings, based on the views of 1,000 finance professionals globally, showed that 33% of global respondents (up from 32% in the last quarter) experienced a loss of confidence in the last quarter, while only 28% reported confidence gains, down from 30% in the previous quarter.

Besides, the report also notes that the rapid escalation of relatively contained issues, such as the Ukrainian crisis, the Ebola outbreak and the rise of the Islamic State, raised serious questions about how the global economy would react to a truly destabilising global event.

 

This article first appeared in The Edge Financial Daily, on November 14, 2014.