Chart 1: Malaysia business confidence and revenue indexDavid went on to explain that Asia Pac is traditionally a very open region – reliant on exports so the slump in global trade helps explain why more businesses in Asia Pacific are reporting a drop in profitable opportunities (63%) and income (57%) than almost anywhere else. “Along with Indonesia, Malaysia suffered with commodity prices, but the GECs analysis by economic researchers at Longitude reveals that the worst has now passed,” he said. Global Results This survey from ACCA and IMA further found that, globally, more than half of the companies are either cutting or freezing employment, while only 14% are increasing investment in staff. Almost half of global businesses reported a drop in income in Q1. As a result, every region except North America saw a jump in the number of businesses cutting capital expenditure. With emerging economies continuing to struggle with low commodity prices and many businesses on a spending lock down, the outlook for the global economy is becoming increasingly gloomy. According to Faye Chua, ACCA’s Head of Business Focus, it is the emerging markets suffering most from bottom lines being squeezed: “Wages are rising rapidly in many parts of the world and businesses are finding it harder to cope as revenues come under increasing pressure. The sharp drop against the dollar experienced by many currencies will also have pushed up costs, making imports more expensive and raising the value of dollar-denominated debts. All this means that firms in emerging-market economies are very pessimistic about their prospects.” Faye warns that global policymakers could be running low on ammunition in the fight to turn things around, adding: “In developed economies, governments have worked hard to stabilise their debt-to-GDP ratios. Will they want to reverse that good work and risk the wrath of bond investors? It’s highly unlikely. Instead, we’ll see the heavy lifting left to central banks in the main. The problem with this approach is there are serious doubts around their ability – or indeed inclination – to provide more support.” For Faye, pulling the global economy out of the doldrums is not going to be achieved in the short term: “Once income begins to drop and businesses stop hiring, getting them to a point where they are confident enough to begin doing so again is difficult, but vital. “The one positive is business confidence in non-OECD economies did pick up slightly in Q1, led by central and eastern Europe – and Russia in particular. Let’s hope that is a sign of more positive news to come,” said Faye.
Chart 2: Businesses cutting investmentDavid concludes: “What is clear from this latest survey is just how interconnected the global economy is – sentiment and optimism is intrinsically linked. “Accountants operate at the coal face of this volatility, and one of the messages from this survey is that there is a need to innovate. Thankfully respondents recognise this necessity – after the opportunity to lower costs, benefiting from focusing on innovation was the second opportunity most identified by companies who see the need to innovate and get ahead of the competition. Malaysian business is adept at innovating, with a government that is committed to making innovation part of its policy work though the Agensi Innovasi Malaysia (AIM).” Fieldwork for the Q1 2016 GECS took place between 26 February and 15 March, and attracted more than 1,200 responses from ACCA and IMA members around the world, including more than 100 CFOs. Nearly half the respondents were from small and medium enterprises, with the rest working for large firms of more than 250 employees.