Businesses confidence on a see saw heading into 2012
Businesses confidence on a see saw heading into 2012
Singapore, Tuesday 3 January 2012 - Global business confidence is balancing on a see saw heading into 2012 according to new figures from Grant Thornton’s International Business Report (IBR). With the global economic outlook dominated by the crisis in the eurozone, fears are increasing that business growth will become even more difficult than in 2011.
The latest survey of 2,800 businesses in 40 economies globally conducted in November/December 2011 shows that global business optimism in the fourth quarter of 2011 stands at net 0%, indicating a balance between those business leaders feeling optimistic about their economies in 2012 and those feeling pessimistic. It represents a further deterioration from 3% in Q3 2011 and 31% in Q2 2011. Optimism in Europe fell from 0% to -17% in Q4. In the eurozone optimism fell from 2% to -16%. The global uncertainty is sapping confidence amongst businesses here with optimism level in Singapore tumbling
to -4% from 37% in Q3 and 64% in Q2. Year-on-year trend Singapore business owners’ confidence revealed a drop of 20 percentage point from 62% in 2010.
Aw Eng Hai, Advisory Services Partner of Foo Kon Tan Grant Thornton LLP, said:
“The business optimism results mirror the perilous position of the global economy. We are seeing a polarisation of business confidence between Europe and the rest of the world as Europe suffers an acute crisis of confidence – and the threat is that this could spread worldwide. The uncertainty and not knowing how things will turn out is choking prospects for business growth.”
The research shows global trade is suffering. Having risen by 10 percentage points in Q3, the proportion of businesses citing a shortage of orders rose again in Q4, up by 5 percentage points to 37% globally. Business owners in Singapore suffers a harder hit with a double digit increase by 14 percentage points to 28% citing shortage of orders in Q4. ASEAN neighbour Thailand with 78% is by far the highest global casualty. Across the Asia Pacific region 42% (excl Japan), businesses are also suffering from reduced demand (an increase of 6 percentage points from Q3). Also in the same boat are businesses across the eurozone (an increase of 9 percentage points) as are their peers in both North America (up 7 points) and the BRICS (up 4 percentage points).
Local business expectations for increasing revenues and profits fell by 37 and 15 percentage points respectively over the last quarter. The global expectations for these are down two percentage points each to 43% (revenue) and 31% (revenue). Regionally, on both indicators revenue expectations are down significantly in the ASEAN region (down 30 to 38%); profitability expectations down 24 to 33%. EU saw profitability down 12 percentage points to 13% and Latin America (down 16 to 47%).
Operating under a cloud of global uncertainties, local businesses are bracing for reductions in selling prices, exports as well as headcounts. Away from the gloom, businesses in Singapore are generally happy with the level of support provided by lenders, 89% saying lenders are supportive or very supportive towards their business (up 8 percentage points from Q3). This is higher than the global average of 74% citing supportive lenders.
Additionally, findings from the United States provide a welcome and encouraging bright spot in the research. Expectations for increasing revenue and profits in the world’s largest economy in 2012 are both up by seven percentage points, to stand at 48% and 40% respectively. Nearer home, ASEAN neighbour Vietnam leads with global highest expectations in revenue (98%) and profitability (90%).
Around the world, prospects for growth are mixed. Businesses are having to work harder than ever to maintain margins and competitiveness in the face of powerful economic headwinds. Vital to the situation improving or deteriorating is the fate of the eurozone. Businesses are looking to policy makers in Europe for a resolution to the crisis. Businesses in the higher growth economies such as China and Brazil remain positive for now but Europe is the world’s largest single market and consequently a key trading partner. The effects of a further downturn will resonate even in these high growth markets and beyond.
