APAC economic confidence soars; here’s a catch: Jonathan Ashworth
Jonathan Ashworth, Chief Economist at ACCA, shared exclusive insights with People Matters regarding the APAC region's confidence index in Global Economic Conditions Survey (GECS) Q1 2023 report as compared to global trends and concerns. He highlighted that the confidence surge in APAC is one of the most significant recorded, outpacing many other regions. This rise is largely driven by the perceived resilience of the US economy, improvements in Chinese economic data, and optimism about Japan's potential exit from prolonged deflation.
Despite these gains, Ashworth noted that global concerns about increased operating costs persist, though they remain below the peak levels seen in GECS Q3 2022. Interestingly, while cost concerns have eased in North America and Western Europe, they have increased noticeably in Africa, Asia-Pacific, and South Asia. This regional disparity in cost concerns highlights the varied economic challenges faced across different parts of the world.
Ashworth emphasised that while the Q1 2024 confidence surge is promising, the volatility of the Confidence Index means that close monitoring is necessary to see if this positive trend continues into Q2. The overall global rise in confidence, especially in the APAC region, reflects a cautiously optimistic outlook amid ongoing economic adjustments and uncertainties.
Here are edited excerpts from the interaction:
How do you foresee the economy of the APAC region in 2024? Additionally, could you shed some light on the impact of ongoing geopolitical risks on businesses?
"There was a very sharp rise in confidence in Asia Pacific in the latest ACCA and IMA survey of accounting and financial professionals, and most of the key indicators for the region are above their historical averages. Signs of improvement in the global economy, including the manufacturing sector, should be beneficial for activity in the export-oriented region over the remainder of the year. Meanwhile, survey results for South Asia were quite encouraging. Confidence rose for the third consecutive quarter and is now above its historical average," shared Jonathan.
He added, "The region’s largest economy, India, should continue to be the world’s fastest growing major economy, benefiting from strong infrastructure investment by the government, fast growth in its services sector, and the ongoing diversification of global supply chains."
With the recent rise in economic confidence among finance professionals, what key factors do you believe have contributed to this positive trend, particularly in regions such as Asia Pacific and Western Europe?
"Several factors likely help explain the notable rise in confidence in Asia Pacific, including the ongoing resilience of the important US economy, some signs of improvement in China’s economy outside of the housing sector, and more encouraging signs about the health of the global economy and manufacturing sector. Growing optimism that the Japanese economy could finally be emerging from its decades long battle against deflation may also potentially have been a factor," Jonathan reflected on GECS Q1 2024 insights.
He added, "In Western Europe, the euro area and UK economies returned to growth in the first quarter of 2024, after experiencing technical recessions in the second half of last year. Both economies have benefitted from sharp falls in inflation, which, alongside tight labour markets and fast pay growth, has meant that households are now benefiting from positive real income growth after the very sharp squeeze in recent years. Signs of improvement in the global economy may also have lifted sentiment in Europe.
Looking more broadly, the easing in global financial conditions since the latter part of 2023, aided by the US Federal Reserve’s pivot towards monetary easing, has likely supported growth in various economies and helped boost confidence among financial professionals."
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How do you assess the impact of rising cost pressures on businesses in APAC, and how can organisations mitigate these risks effectively?
Concerns among global accountants about increased operating costs rose in the first quarter of 2024, after moderating in the previous five quarters since their peak in the third quarter of 2022.
Cost concerns remain very elevated by historical standards. The rise in cost pressures was driven by developing economies, with cost concerns rising in Asia Pacific, South Asia and Africa, but easing in Western Europe and North America. With cost pressures still elevated in most regions, central banks around the world need to proceed very cautiously with any monetary easing," Jonathan concluded.