The latest Global Economic Conditions Survey (GECS) of global accounting and finance professionals reveals that their economic confidence fell by 12 points in Q4 2021 due to the rapid spread of the Omicron COVID-19 strain.

The survey, conducted at the start of the Omicron outbreak by IMA® (Institute of Management Accountants) and ACCA (the Association of Chartered Certified Accountants), also showed that global orders were little changed in Q4, signaling that growth should continue at a steady pace early in 2022. Other key activity indicators remained relatively little changed with the capital expenditure index up one point and employment index down by six points compared to Q3’s results.

GECS’ fear indices, which track concern about suppliers and customers going out of business, were also little changed in Q4 but are above pre-pandemic levels.

The Q4 2021 GECS report is available on the IMA website.

“We asked our respondents about the risks they perceived ahead for 2022, and perhaps not surprisingly, the main risk identified was about COVID and new waves of infections with over 70% of respondents saying this was a key risk,” said Loreal Jiles, vice president of research and thought leadership at IMA. “Supply shortages came second, which is an issue already having slowed economic growth in late 2021. Policy tightening, either monetary or fiscal, is of less concern, along with policies to address climate change.”

Looking at specific jurisdictions, confidence fell the most in Western Europe by 28 points, which was the first region to see rapid spread of Omicron. Confidence increased modestly in two regions – Asia Pacific by five points and North America by 10 points. Only the Middle East recorded a fall in the orders index of six points, with South Asia showing the biggest increase at +8 points.

Explaining the prospects for 2022, Jiles added: “ACCA and IMA believe that 2022 will see further progress towards a more normal economic environment with global GDP growth of around 4%. Features of this return to normalcy include reduced household savings offsetting withdrawal of COVID fiscal support, easing of supply shortages, and continued growth in levels of employment. While Omicron may slow economic growth through the effect on consumer spending and worker absenteeism, the impact on economic activity should be modest and is likely to be relatively short-lived.”

The biggest economic risk this year is that inflation, already elevated, stays higher for longer, partly because of prolonged supply shortages. Upside surprises to inflation would trigger a greater degree of monetary tightening than what is currently discounted by financial markets. The effect would be to slow global economic growth, preventing a return to its pre-pandemic trend.

“Accountants are often the first to sense the impact of economic activity, informed by the work they do on a daily basis sustaining economies and from the feedback from their clients, especially in the small business sector,” said Michael Taylor, ACCA’s chief economist. “Their feedback reveals concerns about costs increasing again, seeing this measure double over the course of 2021, indicating growing inflationary pressures in many markets around the world.”

Fieldwork for the Q4 2021 survey took place between November 24 and December 8, 2021, and attracted 2,471 responses from ACCA and IMA members, including more than 150 CFOs.