THE FINANCIAL CRISIS and global recession has fragmented into multiple unresolved issues which persist despite the world’s recovering economy, ACCA has warned.
The institute – along with the IMA – has found damaged bank and government balance sheets, unconventional economic policies, political polarisation and geopolitical tensions continue to threaten long-term stability, following a five-year health check of the economy.
In particular, the review highlights how, since mid-2012, business confidence gains have been much stronger in the financial sector than among the world’s SMEs and large corporates. While conceding the benefits of stronger banks on business investment, it warns of a growing imbalance fuelled primarily by central banks.
The report, compiled from data created by 40,000 responses over five years, also raises questions about whether inflation really is dead at the global level, noting that it never really fell in Africa and the Middle East, while in Asia-Pacific input prices have rebounded since late 2012. Even the Chinese mainland, which has driven much of the global fall in inflation, saw a rebound from mid-2013 onwards.
Two of the world’s major economies – the EU and China – have driven much of the uncertainty over the past four years.
Despite mounting government debt in the EU, financial contagion has been contained and much of the missing institutional framework in the eurozone is being built and the banking sector is on the mend. In China, despite repeated ominous warnings, slowing growth has so far remained manageable. However, the country is slowing down and shifting from an investment-driven to a consumption-driven economy. That development will present a significant longer- term challenge for Chinese policymakers, and for countries which have tied their economic growth to commodity exports or direct Chinese demand, the report found.
The ‘health check’ of the recovery has shown businesses around the world have been holding back on long-overdue investment for years, while austerity-hit public sectors have also often sacrificed public investment in order to maintain government consumption levels.
The result has been a loss of productivity which will take years to reverse. ACCA and IMA believe, however, that a rebound in investment already began in 2013.
ACCA senior economic analyst Manos Schizas said: “A recovery which is confined to the financial sector is not sustainable and policymakers need to start asking hard questions about what’s really underlying this in terms of consumer spending, business investment and leverage.”