Global confidence in the fourth quarter of 2020 stalled and remains fragile at the start of 2021, according to the latest Global Economic Conditions Survey (GECS) released by IMA® (Institute of Management Accountants) and ACCA (the Association of Chartered Certified Accountants).

The GECS, the largest regular economic survey of more than 3,000 senior accountants and finance professionals from around the world, captured the true scale of the global recession caused by the response to the coronavirus pandemic, noting that global economic prospects have deteriorated since the survey was completed on December 8. The full report is available on the IMA website.

The survey notes that the global economy contracted by around 4.5% in 2020, the biggest fall in global activity in several decades. Having recovered from lockdown-imposed weakness in the first half of the year, many economies again faced weakness as a second wave of COVID-19 infections triggered renewed lockdowns. The survey envisions a steady recovery this year, but continued uncertainty limits the bounce in consumer and business confidence, with pre-crisis output not being reached until mid-2022. 

The Q4 2020 findings also reveal that:

  • Global orders, employment, and capital investment indices recorded a further modest improvement, but still point to activity well below the pre-crisis level in the fourth quarter of 2019.
  • The “fear” indices—concern about customers and suppliers going out of business—edged lower in Q4 2020 but remain elevated, clearly underlining the extreme uncertainty in the global economic outlook at the start of 2021.
  • Inflation concerns remain negligible with concern about costs staying close to an all-time low.
  • The confidence measure fell back in North America, having surged in the prior third quarter. By contrast, there was a big improvement in Middle East confidence, buoyed probably by continued recovery in oil prices.
  • More than 50% of respondents in Asia Pacific, North America, and South Asia expect sustainable recovery in the second half of this year. 

Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research and policy, said, “The pandemic has forced millions into extreme poverty as emerging markets suffered recession for the first time in decades last year. Policy responses to the pandemic have left the public finances of most economies in a perilous state with budget deficits in the range of 10% to 15% of GDP in many countries with debt to GDP ratios well over 100%.”

He added, “All this presents a big test for policy makers in terms of when to withdraw policy support and when policy should be tightened to rebuild public finances. Policy mistakes would risk derailing economic recovery."

Michael Taylor, chief economist at ACCA, noted that since polling concluded in December, many countries have witnessed increased COVID-19 infection rates, prompting governments to re-impose restrictions, including national lockdowns. This means that global economic prospects early in 2021 have deteriorated since the Q4 survey. At the same time, there has been progress on the approval of vaccines, raising hopes of a permanent improvement in economic conditions later this year. However, unemployment rates will rise in many countries, potentially undermining consumer confidence and limiting the strength of a rebound.

“There are significant risks to the outlook for the year ahead,” Lawson said. “Much depends on the evolution of the COVID-19 virus and variants, rates of infection, and the speed and effectiveness of vaccination programs.”

Fieldwork for the Q4 2020 survey took place between November 20 and December 8, 2020, and attracted 3,086 responses from ACCA and IMA members, including more than 300 CFOs.