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Glal ecnmic cndiin rvey repr:Q4, 2011



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About ACCA

ACCA (the Association o Chartered CertiedAccountants) is the global body or proessionalaccountants. We aim to oer business-relevant,rst-choice qualications to people o application,ability and ambition around the world who seek arewarding career in accountancy, nance andmanagement.

Founded in 1904, ACCA has consistently held uniquecore values: opportunity, diversity, innovation, integrityand accountability. We believe that accountants bringvalue to economies at all stages o their development.We seek to develop capacity in the proession and

encourage the adoption o global standards. Ourvalues are aligned to the needs o employers in allsectors and we ensure that, through our qualications,we prepare accountants or business. We seek to openup the proession to people o all backgrounds andremove articial barriers, innovating our qualicationsand their delivery to meet the diverse needs o traineeproessionals and their employers.

We support our 147,000 members and 424,000students in 170 countries, helping them to developsuccessul careers in accounting and business, basedon the skills required by employers. We work through a

network o 83 oces and centres and more than8,000 Approved Employers worldwide, who providehigh standards o employee learning and development.Through our public interest remit, we promoteappropriate regulation o accounting and conductrelevant research to ensure accountancy continues togrow in reputation and infuence.

© The Association o Chartered Certied Accountants,2012

About IMA

IMA® (Institute o Management Accountants), theassociation or accountants and nancial proessionalsin business, is one o the largest and most respectedassociations ocused exclusively on advancing themanagement accounting proession. Globally, IMAsupports the proession through research, the CMA® (Certied Management Accountant) program,continuing education, networking, and advocacy o thehighest ethical business practices. IMA has a globalnetwork o more than 60,000 members in 120countries and 200 local chapter communities. IMAprovides localized services through its oces inMontvale, N.J., USA; Zurich, Switzerland; Dubai, UAE;

and Beijing, China.

CoNtACts

For urther inormation about the Global EconomicConditions Survey and the series o quarterly reports,please contact:

Wendy TownerHead o Business Intelligence, ACCA+44 (0) 207 059 5755

[email protected]

For urther inormation about the technical and policyissues raised in this report, please contact:

Emmanouil SchizasSenior Policy Adviser, ACCA+44 (0)207 059 [email protected]

Dr Rae LawsonProessor-in-Residence and Vice President o ResearchInstitute o Management Accountants+1 201 474 1532

[email protected]



3Global economic conditions survey report: Q4, 2011

ACCA and IMA are pleased to partner in releasing the 12th edition o the Global Economic Conditions Survey Report .

With every great risk and challenge comes a great opportunity. In short, this comprehensive global survey tells us obusiness condence alling, and economic growth stagnating or even reversing. The business challenges are many –alling revenues, rising costs, problems with access to nance, declining orders, and, concerns about suppliers andcustomers going out o business, among others.

CEOs and their boards are looking to their trusted business advisers to help them ride out the turbulence andachieve sustainable growth, to respond to a changing environment and seize the opportunities it oers. Now, morethan ever, the accounting proession across the whole value chain is being asked to provide its unique expertise.Cutting costs is easy; optimising the use o resources much less so. Hiring and spending are likewise easy, whiledistilling competitive advantage out o human and other organisational resources is not. This is where the competenceand expertise o proessional accountants makes a dierence, and it is in this manner that they earn their placeamong business decision-makers every day.

ACCA and IMA are each committed to adding unique value to the proession and to society, with both ourmembership and the scope o our ‘value chain’ approach spanning the whole world. In these challenging times, parto our responsibility is to report on the environment acing the proession in a robust, comprehensive and relevantmanner. But the larger responsibility is to certiy, educate and connect the world’s best proessional accountants, in

business and in practice, so they can truly enrich organisations, economies and societies.

Glal ecnmic cndiin:he CEo perpecive

H b Chie Executive, ACCA

J th, cma President and CEO, IMA



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Glal ecnmic cndiin rveyrepr: Q4, 2011

About tHE GLobAL ECoNoMIC CoNDItIoNs suRVEY

For three years, the Global Economic Conditions Surveyhas served as a powerul record o the recovery rom thecrisis o 2008–9 and the developments that ollowed it.During this time, the survey has anticipated the loss omomentum in the recovery and the slowdown that we arenow experiencing.

The 12th edition o the Global Economic Conditions Surveymarks a signicant turning point in the survey and a breakin the data series. ACCA and IMA (Institute o ManagementAccountants) have joined orces in order to develop a morerobust and powerul record o the state o the globaleconomy. The timing o this joint initiative is crucial as theglobal economy is entering uncharted territory and aperiod o renewed uncertainty.

With the addition o the substantial IMA sample, the latest

edition o the Global Economic Conditions Survey is easilythe largest to date, capturing the views o 3,775proessional accountants around the world, including 1,414senior executives. It is also the rst to benet rom aboosted US sample, which helps us to better capture thedynamics o the global economy. Over 81% o observationsare rom a ‘core’ sample o 17 major markets or whichmore detailed results are available, and which togetheraccount or 45.6% o world GDP.1

As always, we are grateul to all respondents or giving uptheir time in order to respond to cannot help but be asubstantial and comprehensive survey. The result is, wehope, an equally substantial and comprehensive accounto the global economy.

1. Australia, Canada, Mainland China, Cyprus, Ghana, Hong Kong SAR,

Ireland, Malaysia, Mauritius, Pakistan, Russia, Saudi Arabia, Singapore, the

UK, the UAE, the US, and Zambia.

CoNFIDENCE CoNtINuEs to FALL As INtERNAtIoNALtRADE tAKEs FuRtHER HIt

As Tables 1 and 2 demonstrate, 46% o our total samplereported a loss o condence in the prospects o theirorganisations during the last quarter o 2011, and 73%believe the global economy is either deteriorating orstagnating. Only two major Arican markets, Zambia andGhana, reported a net gain in business condence andonly Ghana and Saudi Arabia reported a positive globaleconomic outlook.

Continuing a trend seen among ACCA’s sample in the thirdquarter o 2011, Hong Kong, Singapore and Cyprus, allrelatively small and very open economies, reported theworst loss o condence and some o the worstperceptions o the global economy. While more localisedeconomic problems may account or some o thissentiment (especially in Cyprus), this nding suggests that

international trade is in decline. Accordingly, respondentsin utilities rms, which are oten domestically ocused andairly robust to economic conditions, have reported someo the strongest net condence gains among IMA’s majorindustrial groups, while pharmaceuticals and IT/communications rms, which are airly exposed to trendsin international trade and global economic activity, havebeen some o the hardest hit. On the other hand,proessional services rms appear to have perormed verystrongly, while respondents in manuacturing rms havereported constant levels o condence despite substantialinternational exposure.




At the regional level, Central and Eastern Europe hasperormed the worst in terms o business condence, with55% o respondents reporting a loss o condence, whileAsia Pacic continues to lose condence at a rate asterthan Western Europe. Arica, the Middle East and SouthAsia remain the most upbeat regions, both in terms obusiness condence and in terms o respondents’perceptions on the state o the global economy. Finally, as

with the previous downturn, trends in business condencehave converged between developed and developing

tale 1: Change in ine cnfdence cmpared 3 mnh ag

J

mh

f l f n hg m f

mh

f ix

Arica 10% 30% 32% 19% 9% –13

Ghana 6% 22% 41% 22% 8% 2

Zambia 7% 30% 19% 28% 16% 7

Mauritius 11% 30% 42% 14% 4% –23

Middle East 10% 32% 32% 19% 6% –17

Saudi Arabia 8% 25% 38% 21% 8% –4

UAE 11% 35% 31% 16% 7% –22

South Asia 12% 27% 42% 14% 5% –21

Pakistan 13% 28% 44% 11% 5% –25

Americas 10% 29% 43% 16% 2% –21

US 9% 29% 44% 16% 2% –21

Canada 6% 39% 39% 13% 3% –29

Western Europe 16% 36% 38% 9% 1% –42

UK 15% 35% 40% 8% 2% –40

Ireland 13% 38% 37% 12% –40

Cyprus 25% 34% 34% 6% 1% –51

Asia Pacic 13% 40% 36% 9% 2% –43

Mainland China 11% 38% 36% 13% 2% –34

Australia 14% 36% 38% 11% 2% –38

Malaysia 13% 37% 42% 6% 2% –42

Singapore 20% 47% 24% 8% 1% –58

Hong Kong SAR 15% 50% 29% 5% 1% –59

Central and Eastern Europe 12% 43% 38% 6% 2% –47

Russia 8% 37% 42% 10% 4% –31

OECD 12% 33% 41% 12% 2% –31

Non-OECD 12% 35% 35% 14% 4% –28

Total sample 12% 34% 39% 13% 3% –30

countries, suggesting that the weakness in demand hasltered through to the traditionally aster-growingemerging economies. Perceptions o the global economy,however, are quite dierent between the two blocs asrespondents are not always able to put the perormance otheir own and neighbouring countries into a globalperspective.

One detail worth noting is that members o eachproessional body were, on average, more likely to report



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tale 2: Percepin he verall rend in he glal ecnmy

J

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w

i’ gg

W h

w

h

wh

W h

hg w w

d’ kw ix

Middle East 32% 23% 21% 18% 6% –13

Saudi Arabia 23% 40% 19% 15% 2% 13

UAE 34% 16% 24% 23% 4% –19

South Asia 33% 24% 22% 19% 3% –13

Pakistan 31% 23% 22% 19% 5% –11

Arica 36% 16% 22% 21% 5% –21

Ghana 25% 40% 15% 19% 2% 19

Zambia 26% 26% 19% 19% 12% 0

Mauritius 43% 7% 26% 21% 3% –41

Americas 28% 14% 40% 13% 6% –42

US 27% 14% 42% 12% 6% –43

Canada 48% 15% 19% 10% 8% –44

Asia Pacic 50% 12% 25% 7% 7% –56

Mainland China 45% 21% 20% 10% 4% –35

Malaysia 43% 13% 33% 5% 6% –58

Australia 53% 4% 22% 11% 11% –60

Singapore 61% 5% 21% 8% 5% –70

Hong Kong SAR 61% 5% 23% 1% 10% –78

Central and Eastern Europe 54% 7% 28% 8% 3% –68

Russia 54% 17% 17% 10% 2% –44

Western Europe 52% 3% 36% 6% 2% –78

Ireland 53% 2% 34% 10% 2% –75

UK 49% 3% 40% 5% 2% –80

Cyprus 74% 1% 21% 3% 1% –90

OECD 38% 9% 39% 9% 4% –59

Non OECD 43% 15% 24% 14% 5% –38

Total sample 40% 11% 33% 11% 5% –51

condence gains than those o the other proessional bodyi they were located outside o their association’straditional markets. A similar i weaker eect was ound toinfuence respondents’ perceptions o the global economy.

Although it is dicult to test this hypothesis, it is likely thatmore internationally mobile proessionals are generallymore condent – their mobility oers them a ‘proessional

hedge’ against economic conditions which infuences theirgeneral outlook.




DEMAND, INFLAtIoN AND FINANCE toP LIst oF busINEss

CoNCERNs

Overall, weak demand is the most commonly citedbusiness challenge reported globally, and was equallycommon among businesses in developed and developingnations. Although demand appears weakest in WesternEurope, especially Cyprus and Ireland, it is also weakeningsubstantially in Arica and South Asia and even markets inaster growing regions, particularly Singapore. On theother hand, markets in the Americas, particularly Canada,are perorming much better. At the global level,accountancy rms and IT and communications rmsappear to be particularly hard-hit.

As with previous quarters, infationary pressures haveremained high on repondents’ list o concerns, especiallyin developing countries and particularly in South Asia andArica. That said, the Asia-Pacic region is also home totwo o the worst-aected countries, Malaysia and HongKong. Only in Central and Eastern Europe are infationarypressures still muted. Infation is a signicant problem ormanuacturers and engineering rms, as well as smallaccountancy rms which oten nd it dicult to increaseees in line with costs.

Access to nance is cited as a challenge by less than athird (30%) o our sample, although this percentage rises

signicantly in Arica, South Asia and Western Europe.Some o the worst-hit markets, such as Cyprus andIreland, have been directly or indirectly aected by severebanking crises, while others, such as Zambia, aredisadvantaged by more mundane behaviours andstructural actors. It is particularly telling that respondentsworking in Utilities rms – traditionally a sae,countercyclical sector – are reporting substantial nancingproblems.

Three Arican countries (Ghana, Zambia and Mauritius),are leading, along with Saudi Arabia, the league table oralmost all types o value-added business opportunities.Opportunities were most commonly reported in new

export markets (especially or rms in South Asia and theMiddle East) and in deepening supply chain relationships(particularly in Arica and the Middle East), with innovationalso providing a likely outlet. Because o the nature oopportunities available, it is mostly respondents in largerrms that reported a more positive outlook, whilewholesalers and retails in particular appear to bebenetting rom changes in demand and investing in theirrelationships with customers – a common sign obusinesses preparing or a downturn.

RAtE oF DECLINE sLoWs As FAItH IN GoVERNMENts

FALLs to RECoRD LoW

Overall, it is dicult to know how steep the decline inbusiness condence or the loss o aith in the globaleconomy has really been due to the break in the GECSseries. However, the trends in the ACCA series suggest thatthe decline has, in both cases, been only moderatecompared to the shock o the third quarter, or even themore modest decline in the second quarter o 2011, withACCA’s Condence index alling rom –34% to –36% andACCA’s Recovery index alling rom –54 to –61.Governments are, increasingly, the target o disapproval,with ACCA’s Government index recording its lowest readingsince the surveys began (Figure 1). These gures are,

unortunately, consistent with alling output in thedeveloped (OECD) economies.

At the regional level, our ndings suggest that the trend inbusiness condence has actually improved slightly inArica, the Americas and the Asia-Pacic Region, whileCentral and Eastern Europe has recorded the worstdeterioration in condence trends.

Q 1

2 0 0 9

Q 2

2 0 0 9

Q 3

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Q 4

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Q 1

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Q 2

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Q 3

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Q 4

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Q 2

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Q 3

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Q 4

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-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

Figre 1: Main ecnmic indice

Note: The lines represent indices rom the ACCA-only sample. The points

at Q4 2011, represent indices rom the ACCA-IMA sample.

Recovery

Condence

Government



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tale 3: Impac , and repne , ecnmic cndiin

i hg t j k t /

b hg

Decreased income 51% Cyprus, Ireland, Singapore Accountancy practices, IT & Comms

Increased costs (eg labour, uel, materials) 48% Pakistan, Malaysia, Hong Kong

Small accountancy practices,

manuacturing/engineering

Problems with access to nance 30% Cyprus, Zambia, Ireland Accountancy practices, Energy and Utilities

Declining orders 28% Singapore, Hong Kong, Mainland China

Small accountancy practices,

manuacturing/engineering

Problems securing prompt payment 28% Ghana, Cyprus, UAE Accountancy practices, IT & Comms

Negative impact o oreign exchange movements 22% Ghana, Mauritius, Russia

Large accountancy practices, Healthcare &

Pharma

Concern about customers going out o business 28% Cyprus, Ireland, Ghana Small accountancy practices, IT & Comms

Concern about suppliers going out o business 14% Zambia, Ghana, UK SMEs, manuacturing/engineering

b

Sta cuts/hiring reeze 46% Australia, Pakistan, UK Public sector, Proessional Services

Scaling back investment in capital projects 27% Australia, UK, Zambia Public sector, Energy & Utilities

Scaling back investment in sta 27% UK, Australia, Ireland Public sector, Proessional Services

New jobs created/hiring resumed 7% Saudi Arabia, Mainland China, Mauritius SMEs, Proessional Services

Increasing investment in capital projects 6% Saudi Arabia, Zambia, Ghana SMEs, manuacturing/engineering

Increasing investment in sta 5% Ghana, Saudi Arabia, Malaysia SMEs, Proessional Services

b

Exploring lowering costs 25% Ghana, Zambia, Mauritius Large nancials, IT & Comms

Exploring/entering new markets 19% Ghana, Saudi Arabia, Mauritius Large corporates, Proessional Services

Building strong supplier/client relationships 16% Saudi Arabia, Zambia, Ghana Large nancials, Wholesale/Retail

Focusing on innovation 16% Ghana, Zambia, US Large corporates, Healthcare & Pharma

Focusing on niche markets/products 14% Ghana, Malaysia, Australia Small nancials, Proessional Services

Promoting high quality standards 14% Ghana, Australia, Zambia Large nancials, Proessional Services

Beneting rom general change in demand 8% Saudi Arabia, Australia, Ghana Large corporates, Wholesale/Retail

Increasing orders 6% Saudi Arabia, Zambia, Malaysia SMEs, manuacturing/engineering




CoNCERNs MouNt WHILE INVEstMENt AND

EMPLoYMENt FALL oN LoW DEMAND, tIGHt FINANCE

This has been the third consecutive quarter in whichrespondents reported weakening demand and problemsaccessing nance (Figure 2). However, the combination osustained demand weakness and nancing problems hascontinued to take its toll, leading to a sharply increasingnumber o respondents reporting concerns or the survivalo their suppliers – more than double the percentagerecorded only six months ago. While the percentage orespondents reporting problems with late payment has notrisen in line with such perceptions, the dynamic is nowalmost certainly a cause or concern. Overall, this patterno low demand and cashfow problems was most

commonly reported by IT & communications rms as wellas accountancy practices (Table 3). Consistent with allingdemand, infationary pressures appear to have allensignicantly.

As Figure 3 shows, a tentative recovery might be in sight

or demand at the global level, as the decline in new ordershas momentarily halted and some industries, especiallymanuacturing, are demonstrating substantial dynamism.Still, investment has allen or a third consecutive quarter,and employment is alling even aster, both led by asignicant slowdown in utilities, proessional services rmsand the public sector.

0%

20%

40%

60%

80%

100%

Poor access to finance

Falling demand

Problems securing pr ompt payment

Concerns about suppliers going out of business

Q 1

2 0 0 9

Q 2

2 0 0 9

Q 3

2 0 0 9

Q 4

2 0 0 9

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Q 3

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Q 2

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Figre 2: Demand and fnancial prere(ACCA sample only)

Figre 3: order, emplymen and invemen indice(ACCA sample only)

Q 1

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Q 2

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Investment - staff

Investment - capital

Orders

Employment



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FIsCAL stIMuLus AND Its LIMItAtIoNs

In previous editions o this survey we noted that theweakening global economy will put pressure ongovernments to increase spending, but weak scalundamentals will constrain the extent to which they cando so in a sustainable way. We have returned to thisquestion in late 2011, as it is likely to dene the economicchallenges o the new year. Figure 4 demonstrates thedynamics o scal policy in major ACCA/IMA markets.

In some o our key markets, most notably the US, Russiaand mainland China, respondents expect that theirgovernments will increase spending in the ace o aweakening global economy, but at the price o scal

sustainability in the long-run. In other major markets, suchas the UK and Ireland, austerity is seen as coming at theprice o economic growth.

Out o all major markets in this sample, only in Cyprus is

austerity seen as largely sustainable. Finally, respondentsin some countries eel that their governments are likely toincrease public spending but eel that there is room ormore stimulus – these include Singapore, Pakistan, SaudiArabia and the UAE. It is worth noting that the onlycountries in which governments achieved net approvalrom respondents (marked in red) were either in the‘sustainable stimulus’ category (Singapore, Saudi Arabia,UAE, Ghana), or otherwise as close as possible to a neutraloutlook within their quadrants (Mauritius and Canada).

Figre 4: Dynamic and evalain gvernmen pending inhe medim erm (5yr)

Australia

Canada

Mainland China

Cyprus

Ghana

Hong Kong SARIreland

Malaysia

Mauritius

Pakistan

Russia

SingaporeSaudi Arabia

UK

UAE

USA

Zambia

-100

-80

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-100 -80 -60 -40 -20 0 20 40 60 80 100

Government

overspending

Medium term trend in Government spending

u s

u s




CoNCLusIoNs

As proessional accountants look ahead to the new year,their views paint a sobering picture o the global economy.They tell us that international trade continued to dry up inthe last quarter o 2011, posing a particular challenge orwhat have, until only recently, been dynamic and openeconomies leading the recovery. While the negative trendin global business condence has eased, and there areencouraging signs rom resilient new orders, the damagedone to global demand over the last year has beensubstantial.

Ater three consecutive quarters o weakening demand, thecumulative eect is beginning to take its toll on business,

and with banks around the world acing an uphill climbtowards capital adequacy tightening nance is now addingto this challenge. The result is a deteriorating outlook orbusiness cashfow around the world which may be drivinga rise in business ailures. Infationary pressures, whichbuilt up steadily over the past two years, are now easing,but the underlying causes o this trend may be just asworrying as last year’s rise in operating costs.

In line with this deteriorating outlook, our ndings point toweakening trends in employment and investment globally.This is particularly worrying as these two indicators haveremained weak throughout the last three years and are

crucial to any kind o sustainable recovery.

Finally, our ndings suggest governments have to perorm

a tough balancing act in coming years i they are tosupport a fagging economic recovery. Sustainable scalstimulus is a luxury that not all governments can aord,especially among developed nations, while austerity isproving hard to reconcile with sustained growth, unlessperhaps as a response to exogenous shocks. As a result,government approval levels are at a record low, just whenthey are most likely to infuence business condence.

Overall, the stage appears to be set or a renewed globaleconomic downturn in 2012 and most respondents to theGlobal Economic Conditions Survey certainly believe thisto be the case. As trusted business partners and advisers,proessional accountants will be called upon to steer

businesses through challenging times in the new year,especially in the areas o strategic planning, scenarioanalysis and risk management. Through their jointcommitment to the largest regular survey o proessionalaccountants in the world, ACCA and IMA will be proactivein strengthening organizational capability to manage theturbulence and help create sustainable growth.



Global economic conditions continue to dominate business lie. They are at the top o the world’spolitical agenda, and updates and debates on economic issues are almost constantly the ocus omedia attention. While most national economies are now growing once again, it is ar rom clearhow sustainable this growth is or how long it will be beore a sense o normalcy returns to theglobal economy.

ACCA and IMA have been prominent voices on what the accounting proession can do to help turnthe global economy around. Both bodies have published extensively on a range o topics rom theregulation o nancial markets or the prevention o raud and money laundering, to air value or therole o international accounting standards, to talent management and the development o an ethicalbusiness culture.

ACCA and IMA aim to demonstrate how an eective global accountancy proession contributes tosustainable global economic development; to champion the role o accountants as agents o valuein business; and to support their members in challenging times. Both proessional bodies believethat accountants add considerable value to business, and never more so than in the currentenvironment.

Accountants are particularly instrumental in supporting the small business sector. Small andmedium-sized enterprises (SMEs) account or more than hal o the world’s private sector outputand about two thirds o all employment. Both ACCA and IMA ocus much o their research andadvocacy eorts on articulating the benets to SMEs o solid nancial management and reliablenancial inormation.

WHERE NEXt?

As countries around the world once again consider strategies to promote stability and stimulategrowth, the interconnectedness o our economies, and how they are managed and regulated, is nowrmly in the spotlight. The development o the global accountancy proession has beneted rom,and in turn contributed greatly to, the development o this interconnected global economy. Theortunes o the two are tied. ACCA and IMA will, thereore, continue to consider the challengesahead or the global economy, and ocus on equipping proessional accountants or the uncertainuture.

To nd out more visit

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ACCA, IMA and he glal ecnmy

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acca 29 Lincoln's Inn Fields London WC2A 3EE United Kingdom / +44 (0)20 7059 5000 / www.accaglobal.com

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