Business

Caribbean's economic outlook plummets in the latest Global Economic Conditions Survey

Raymond Campbell

Wednesday, January 31, 2018

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According to the latest quarterly Global Economic Conditions Survey (GECS) by ACCA (the Association of Chartered Certified Accountants) and IMA (Institute of Management Accountants), confidence across the Caribbean has plummeted.

The latest GECS took place between November 24 and December 11, 2017, and attracted 4,011 responses from ACCA and IMA members across the world, including more than 250 chief financial officers (CFOs).

NOT SURPRISING

Given all that occurred across the region in the past year, the news isn't surprising considering the extreme weather that wreaked havoc across the Caribbean. Hurricane Irma unleashed catastrophic damage across the Caribbean and US. It was the most powerful Atlantic hurricane ever recorded, causing one of the largest humanitarian catastrophes in history.

The hurricane was a stark reminder of the dangers posed by extreme weather. Tropical storms are not uncommon to the Caribbean and unfortunately the risk of natural disasters cannot be eliminated. Yet the scale of damage it caused was huge — it's no wonder people have fears for the future after having faced it.

The hurricanes late last year have damaged growth prospects and dented confidence, and so the Caribbean remains firmly in negative territory. Although the rebuilding will boost growth, the region's economies are likely to suffer in the near term, particularly in the crucial tourism sector.

The Caribbean isn't the only region apprehensive about its future. The research also uncovered that confidence levels are lowest in the Middle East. Falling oil prices in the Middle East have seen regional confidence fall sharply.

JAMAICA ENCOURAGING

The outlook for Jamaica is relatively encouraging as the trend in our Business and Consumer Confidence Indices shows both business and consumer confidence relatively high as compared to pre-2016.

The third quarter of 2017 survey found 50 per cent of Jamaican businesses expecting an improved economy, 58 per cent saying it is the right time to expand, and 66 per cent expecting financial gains in the year ahead. Jamaica's consumer confidence is at its highest levels since 2001, with relatively high levels of consumers indicating an intent to buy homes, motor vehicles, and take vacations.

The positive indicators from the business and consumer confidence indices are supported by relatively positive reviews of the International Monetary Fund (IMF) on Jamaica's economic performance. Indeed, Mr Zhang, the deputy managing director of the IMF, commented as follows on Jamaica's economy: “…Programme performance is on track and macroeconomic stability is entrenched with stronger fiscal and external positions, subdued inflation, and employment at historic highs…”

For the rest of the world, the picture of global economic confidence is relatively high. Despite a small dip, the relatively high level of confidence reflects a stronger outlook in the US and India. Yet on a global level the picture remains mixed.

Many people expecting conditions to worsen now exceed those expecting it to improve by 14 percentage points, according to the research. Confidence in the US has rebounded strongly and is now at its highest level since the start of 2017. With growth expected to hit three per cent this year, and recent tax changes raising hopes of further fiscal boost, over a third of respondents expect to see improving conditions. Yet 25 per cent feel less confident than in the previous quarter. In particular, there are concerns with near full employment, the recent corporation tax cut could lead to inflation rather than growth.

The overall outlook for 2018 is a promising one in terms of global economic growth and confidence. Some of the signs of a global economic recovery in 2017 look set to continue with improvements for developed and emerging markets. While growth is expected to slow in China as the Government focuses on risk management, this should be compensated by gains elsewhere.

One thing for certain is that an economic turnaround for the Caribbean will not happen over night. It is vital for an economy and it is up to policymakers to demonstrate clear ideas to boost business confidence and avoid further downward drift.

Accountants are crucial to steering businesses through these difficulties; after all, accounting is the backbone of the business financial world. Through contributing to discussions about economic growth, managing finances and promoting good financial management, they enable CFOs to successfully navigate businesses as they face tough times ahead and take advantage of challenging circumstances.

Raymond Campbell is a partner at KPMG, Jamaica, and also serves as president of the Institute of Chartered Accountants of Jamaica. He is a regular speaker at conferences and seminars on financial and economic issues.

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