However, while the Global Economic Conditions Survey (GECS) from ACCA (the Association of Chartered Certified Accountants) and the Institute of Management Accountants (IMA) shows that two thirds (67 percent - up from 46 percent in the previous six months) of respondents in India were optimistic about the national economy, there are signs that access to growth capital is tightening.

Emmanouil Schizas, ACCA’s Senior Economic Analyst, said, “Overall, it appears as though the FDI crunch that endangered the recovery in 2013 is coming to an end. Business opportunities increased significantly in the last six months, suggesting recovery from a two-year slump. With a small lag, business capacity building has also started to stabilize after a year-long downturn, and cash flow and demand conditions have also started to recover following a significant tightening in late 2013. Importantly, price and exchange rate volatility is now lower than at any point in almost two years. “

“In response, business confidence has recovered from a slump in late 2013, and is once again up year-on-year. 43 percent of respondents in Q4 2013 and Q1 2014 reported confidence gains, up from 29 percent in the previous six months, while only 30 percent reported losses, down from 49 percent previously,” Emmanouil Schizas said.

“Despite improving fundamentals in many respects, there are also signs that India’s economy is facing new headwinds. Respondents report that access to growth capital is still tightening, and deteriorated substantially over the last months, exacerbating an 18-month negative trend,” Emmanouil Schizas added.

Globally, business confidence is up, but the economic recovery could be seriously flawed, GECS has revealed.

The first GECS edition for 2014 saw global business confidence nearly cross over into positive territory for the first time in five years.

Thirty percent of respondents around the world were now more confident about the prospects of their organisations than they had been three months earlier, a figure unchanged since late 2013. On the other hand, 31 percent reported a loss of confidence, down from 34 percent in late 2013.

Additionally, more than half of the global GECS sample (58 percent, up from 55 percent in late 2013) were optimistic about the state of their national economies, reporting that recovery was underway or about to begin. The pessimists only made up 38 percent of the sample, down from 42 percent in the previous quarter.

However, a closer look revealed a worrying picture for the economic recovery.

“Despite the best business confidence readings since the GECS began in 2009, ACCA and IMA’s analysis of the influence of fundamentals on business confidence suggests that the economic recovery is flawed and has now become much more fragile,” Emmanouil Schizas said.

“Since early 2013, global business confidence has become increasingly dependent on price and exchange rate stability. This trend is a sign of building financial turbulence, and has accelerated dramatically in early 2014. Financial stability is now a more significant contributor to business confidence than cash-flow and demand. Expectations of government spending and ratings of government policy also became more significant contributors in early 2014, suggesting that the recovery has been hollowed-out in early 2014 and is now over-dependent on policy,” Emmanouil Schizas added.
Emerging markets

The ACCA and IMA survey has revealed a continued divergence of fortunes between developed and emerging markets.

Raef Lawson, Ph.D., CMA, CPA, IMA vice president of research, said, “The announcement of the Federal Reserve’s intention to ‘taper’ its programme of asset purchases sent shockwaves through the world’s financial markets in 2013 and it didn’t take long to reach the real economy, especially in emerging markets which witnessed an investor exodus.”

“Three quarters into the post-Taper-announcement period, the change of fortunes throughout ACCA and IMA’s emerging markets is becoming ever more evident. The performance gap between the two groups has widened dramatically from Q3 2013 onwards, and while business revenues and hiring appear to have resisted the general trend in early 2014, overall the gap between developed and emerging economies has widened once again,” Raef Lawson added.

“This is despite business opportunities being no less forthcoming in emerging markets than in developed ones. ACCA and IMA members are telling us that it is business conditions on the ground, and particularly the lack of growth capital and financial instability, that has held emerging economies back,” Raef Lawson concluded.


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