The latest survey of over 1000 accountants across the world has said that that global economy may not return to pre-COVID-19 levels until 2022.
Known as the Global Economic Conditions Survey (GECS) Q3, however revealed improvement in optimism in the third quarter (Q3) after a torrid first half of the year which saw confidence at record lows.
The report ispublished by the Association of Chartered Certified Accountants, ACCA, and the Institute of Management Accountants, IMA.
Among other things, the survey showed that global confidence jumped to a three-and-a-half year high in Q3, although this reflects the change in confidence compared with June when many economies were in varying degrees of lockdown. Activity measures, such as orders, capital spending and employment, also improved in the latest survey but only modestly; they remain at low levels consistent with the global economy operating well below the pre-COVID-19 level into 2021.
However, the GECS Q3 indicated that the global economy will remain in weak and precarious stated in the latter part of 2020.
Commenting on the findings, Thomas Isibor, Head of ACCA Nigeria, said: “Despite the jump in confidence, the overall message from the GECS is still one of weakness with the global economy on course this year for its largest peace time contraction since the 1930s.”
Also, Raef Lawson, IMA Vice President of Research and Policy “The nature and prolonged duration of the COVID-19 shock means that it is likely to result in permanent changes to the structure and potential growth rates of economies”.
“Higher private sector savings may be one outcome: households and companies limit consumption and investment respectively as they remain cautious in the face of extreme uncertainty. This suggests that the public sector may have to run significant fiscal deficits for some time in order to support overall demand. For now, at least mounting public sector debt can be sustained since interest rates are exceptionally low.”
On the outlook for 2021, ACCA’s Chief Economist Michael Taylor concludes: ‘The Q3 recovery has been driven mainly by the consumer, where the rebound in retail sales has been especially strong. But our view is that the consumer will lose momentum in coming months and into 2021.Increasing, COVID infections in some countries and continued social distancing measures everywhere will undermine consumer confidence and spending. In addition, fiscal support is being scaled back in many cases, contributing to a rise in unemployment. World GDP is not likely to regain its pre-crisis level until at least the second half of 2022.
“The nature and duration of the COVID-19 economic shock is such that it is likely to result in permanent changes to the structure of economies and to the trend rate of economic growth. Households and companies may well increase their savings rates, hampering private sector demand. This means that the public sector may have to run significant fiscal deficits for the foreseeable future in order to support overall demand.”