– Confidence in the Middle East region increased modestly in Q2 as oil prices continued to recover for the first time since the start of the pandemic
– Improved oil revenues and a relaxation of social restrictions suggest that economic recovery will continue in coming months.
Middle East: A new Global Economic Conditions Survey (GECS) by ACCA (the Association of Chartered Certified Accountants) and IMA® (Institute of Management Accountants) finds “swift and strong” recovery in global confidence in the second quarter of 2021, returning global activity to the pre-pandemic level of late 2019.
The GECS, the largest regular economic survey of over 1,000 senior accountants and finance professionals from across the world, has consistently captured the true scale of the global recession caused by the Covid-19 pandemic, tracking both, region-specific drops in confidence since the beginning as well as the surge in confidence triggered by the combined effects of vaccines and local fiscal stimuli.
This GECS Report points to the global economy gathering momentum through the second half of this year. While global confidence dipped slightly in Q2, this occurred after the biggest jump in confidence in the 10-year history of the survey the last time.
At the same time, there is a divergence in recovery between advanced and emerging economies. Advanced economies are benefiting from rapid progress on vaccinations and spending of accumulated savings that are allowing a return to more normal economic conditions. Yet, many emerging market economies continue to face economic weakness, as limited vaccinations allow further waves of COVID infections. The GECS highlights this divergence with buoyant regional surveys in North America and Europe but much weaker ones in South Asia and Africa.
Other key findings:
- The key global activity indicators, such as orders, recorded further improvement in the Q2 survey and are now above the level in Q4 2019, the period immediately before the pandemic began.
- Overall, the world economy has now recovered to its pre-pandemic size. This has been driven by rapid growth in the United States and China, the two biggest economies; there are many economies still with plenty of ground to make up.
- The two “fear” indices – measured by concern that customers and suppliers may go out of business – both declined in the Q2 survey, confirming that the extreme uncertainty created by the COVID-19 crisis has fallen back towards more normal levels.
- The GECS index of concern about operating costs increased in the latest survey and is now at its highest level since Q3 2019. But concern remains below the level that would point to a sustained big rise in inflation.
“In many emerging markets vaccinations have made little progress, leaving them vulnerable to renewed waves of COVID-19 and variants with consequent restrictions that curtail economic recovery. This pattern seems likely to persist well into 2022 as well. The supply of vaccines to emerging markets should increase significantly in the coming months to revive the growth projections as per the last report,” said Michael Taylor, Chief Economist at ACCA.
Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research and policy, noted that for 2021, global Gross Domestic Product (GDP) growth is likely to approach 6%, an exceptionally strong rebound after the 3.5% fall last year. This growth will be concentrated in advanced economies where levels of vaccination are now such that social distancing restrictions can be relaxed and economic conditions return to normal. Lawson said, “This is a global pandemic, which needs global action to safeguard the health of populations and their economies – in the short and long term. For IMA and ACCA, there is a clear link in doing this to the UN SDGs, specifically Goal 1 to end poverty everywhere and Goal 8 decent work and economic growth.”
“In addition to rapid deployment of effective vaccines, advanced economies have been able to deploy massive fiscal support measures that have maintained household disposable incomes, supported businesses, and prevented large rises in unemployment. Buoyant housing markets have supported consumer spending. This means that as economic conditions move towards normalization, economies are likely to recover very rapidly,” Lawson said, yet noting that, “In many emerging markets, vaccinations have made little progress, leaving them vulnerable to renewed waves of COVID-19 and variants with consequent restrictions that curtail economic recovery.”
The global economy continues to gather momentum and the second half of the year is likely to see strong GDP growth. For 2021 as a whole global GDP growth is likely to approach 6%, an exceptionally strong rebound after the 3.5% fall last year. But this growth will be concentrated in advanced economies where levels of vaccination are now such that, in many countries, social distancing restrictions can be relaxed, and economic conditions return to normal.
The survey highlights that the confidence in the Middle East region increased modestly in Q2 as oil prices continued to recover, exceeding $70 per barrel for the first time since the start of the pandemic. Activity indicators, such as orders, also improved modestly. Some countries in the region, , UAE and Bahrain especially, are well advanced in vaccination plans. Improved oil revenues and a relaxation of social restrictions suggest that economic recovery will continue in coming months.
Lawson cautioned, however, that “health and economic risks are considerable. For as long as COVID-19 remains widespread in parts of the world, there is a chance of a vaccine resistant variant emerging and spreading, forcing renewed lockdown measures with consequent economic harm.”
Fieldwork for the Q2 2021 survey took place between June 1 and June 15, 2021 and attracted 1,100 responses from ACCA and IMA members, including more than 100 CFOs.
ACCA (the Association of Chartered Certified Accountants) is the global professional body for professional accountants. We’re a thriving global community of 233,000 members and 536,000 future members based in 178 countries and regions, who work across a wide range of sectors and industries. We uphold he 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 organisations and flourishing societies.
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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.