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The GECS, the largest regular economic survey of more than 1,000 senior accountants and finance professionals from around the world, has consistently captured the true scale of the global recession caused by the coronavirus pandemic, tracking the drop in confidence since the beginning and a new outlook in confidence triggered by the combined effects of vaccines and the fiscal stimulus.
The full report is available on the IMA website.
This GECS has recorded the largest increase in global confidence since the survey began 10 years ago. Between the Q4 survey conducted last December and the Q1 survey in March, there has been a significant improvement.
The report authors note that with the regulatory approval of several highly effective vaccines against COVID-19 and the subsequent introduction of vaccination plans in many countries, a permanent solution to the health crisis is within reach. Activity indicators covering orders, capital spending, and employment all increased to some degree in the first quarter of this year, closely mirroring the level of confidence in the last quarter of 2019 before the pandemic struck.
Raef Lawson, Ph.D., CMA, CSCA, CPA, CAE, IMA professor-in-residence and vice president of research and policy, noted that the current path to global economic recovery differs from the financial crisis of 2007 to 2009, which resulted in a long period of subdued growth as private sector balance sheets were rebuilt through increased savings.
Said Lawson, “This crisis is different as its root cause is health and not economic. As of Q1, global COVID-19 infections are high relative to the vaccination rate, so risks remain significant. But the huge government support provided to both households and companies over the last year leaves both well-placed to resume spending once the health crisis is over. There are likely to be permanent changes in the pattern of spending and other long-term economic consequences of the COVID crisis.”
“Having suffered the biggest recession for several decades in 2020, the global economy is on course for a relatively quick rebound,” said Michael Taylor, chief economist at ACCA. “The good news is that vaccination plans with continued policy support are on course to lift the global economy out of the COVID abyss this year.”
The GECS points to three factors that will heavily influence economic prospects in 2021, starting with the rate of vaccinations, which can replace lockdowns to control COVID-19, thereby allowing economic conditions to return to normal. Second are major fiscal stimulus packages, such as in the U.S., which will have positive spill-over effects on other economies. Finally, particularly in advanced economies, significant savings accumulated during periods when spending was severely restricted can be a source of extra demand amid improved economic conditions.
The Q1 2021 findings also reveal that confidence improved in all regions as did orders, with the exception of Africa. The “fear” indices—concern about customers and suppliers going out of business—showed mixed results in this survey but both remain above long run averages, underlining continued heightened uncertainty. Additionally, near-term cost concerns increased, reflecting higher commodity prices and other costs as the global economy recovers.
Further, the GECS notes that two-thirds of respondents expect higher inflation over the next five years, but there is a marked contrast between regions with North America registering higher inflation expectations than Western Europe.
Fieldwork for the Q1 2021 survey took place between February 26 and March 11, 2021, and attracted 1,004 responses from ACCA and IMA members, including more than 100 CFOs.