The Middle East was one of the only regions to report an improvement in GECS confidence, marking an increase during Q3 as compared to Q2
Inflation continues to impact global economies and with tightening of policies, latest GECS shows signs of a flat economy
Middle East: The latest edition of the Global Economic Conditions Survey (GECS) from ACCA (the Association of Chartered Certified Accountants) and IMA® (Institute of Management Accountants) found confidence on the economic outlook remaining well below the median reading over the past decade due to fears over inflation and a slump in business. The Q3 2022 GECS, the largest regular economic survey of accountants around the world, covered 12 countries in the Middle East including, the United Arab Emirates, Saudi Arabia, Qatar, Oman, Egypt, Jordan, and Iraq. The report can be accessed here or at https://www.imanet.org/insights-and-trends/global-economic-conditions-survey.
The survey took place between September 2 and 14, 2022, and gathered over 900 responses. Globally, the survey found that nearly three-quarters of businesses are wrestling with increased costs, with the highest proportion of respondents reporting increased cost pressures for the last decade and over one in three worried about decreased income, with a similar proportion highlighting foreign exchange volatility as uncertainty and glimpses of recession dominate the latest economic outlook.
According to the survey, the Middle East was one of the only regions to report improvements in new orders, in addition to South Asia. It also revealed that Q3 showed signs of balance with respect to the last quarter which saw a sharp fall. In this quarter, the market rose with some help from high energy revenues, with oil prices averaging and remaining above the median level, almost more than $100 per barrel (bbl). Despite the decrease in confidence, the region’s prospects look relatively robust, provided oil prices can be sustained.
Two developments underlined the precarious nature of the commercial environment at a global level. First, an increase in the number of respondents reporting “problems securing prompt payment,” which has risen to the highest level in four years. This could be the first sign of an increase in the number of organizations that may be experiencing cash-flow difficulties. Additionally, the survey found that there has been a noticeable rise in the numbers reporting “problems accessing finance,” with the most aggressive tightening of monetary policy in 40 years likely to hit corporate liquidity.
The data further notes confidence in the economic outlook remaining well below the median reading over the past decade, while the other three indicators that are more closely related to economic activity – new orders, capital expenditure, and employment – all showing a further deterioration. Taken as a whole, the series is consistent with slower global growth for the remainder of the year, coupled with inflationary pressures rising.
“Although confidence recovered from the very sharp fall in the Q2 survey, the indices for new orders, capital spending and employment all showed further deterioration,” said Loreal Jiles, vice president of research and thought leadership at IMA. “The two ‘fear’ indices – reflecting the level of concern that customers and suppliers may go out of business – were little changed but remain above pre-pandemic levels.”
“These series are less volatile than the confidence measure and may give a better sense of the slowdown in economic growth that is underway in the region,” said Jamie Lyon, head of skills, sectors, and technology at ACCA. “With the U.S. Federal Reserve engaged in an aggressive monetary tightening to bring inflation back under control, it is inevitable that both confidence and economic activity will be reduced.”
“Our latest Global Economic Conditions survey points to obvious ongoing challenges in the global economy, a reflection of the continued economic fallout from the Russian invasion in Ukraine, a further tightening of monetary policy in key jurisdictions, and a cost-of-living crisis,” Lyon said. “One of the key risks will be how much and how quickly central banks will seek to further tighten monetary policy in the months ahead to tame inflationary pressures, and whether or not the global economy could slow more than business leaders expect in 2023.”
“For most regions in the world, the GECS survey points to a decline in business orders both in comparison to the previous quarter and looking across the new orders index over the past year. Coupled with inflationary pressures, it suggests a challenging time for businesses ahead in the next few months,” added Jiles.
About IMA® (Institute of Management Accountants)
IMA® is one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA® (Certified Management Accountant) and CSCA® (Certified in Strategy and Competitive Analysis) programs, continuing education, networking, and advocacy of the highest ethical business practices. Twice named Professional Body of the Year by The Accountant/International Accounting Bulletin, IMA has a global network of about 140,000 members in 150 countries and 350 professional and student chapters. Headquartered in Montvale, N.J., USA, IMA provides localized services through its four global regions: The Americas, Asia/Pacific, Europe and Middle East/India. For more information about IMA, please visit http://www.imanet.org.
ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We’re a thriving global community of 241,000 members and 542,000 future members based in 178 countries and regions, who work across a wide range of sectors and industries. We uphold the highest professional and ethical values. We offer everyone everywhere the opportunity to experience a rewarding career in accountancy, finance and management. Our qualifications and learning opportunities develop strategic business leaders, forward-thinking professionals with the financial, business and digital expertise essential for the creation of sustainable organizations and flourishing societies. Since 1904, being a force for public good has been embedded in our purpose. In December 2020, we made commitments to the UN Sustainable Development Goals which we are measuring and will report on in our annual integrated report. We believe that accountancy is a cornerstone profession of society and is vital helping economies, organizations, and individuals to grow and prosper. It does this by creating robust trusted financial and business management, combating corruption, ensuring organizations are managed ethically, driving sustainability, and providing rewarding career opportunities.
And through our cutting-edge research, we lead the profession by answering today’s questions and preparing for the future. We’re a not-for-profit organization.