The latest Global Economic Conditions Survey from the Association of Chartered Certified Accountants (ACCA) and IMA has found out that more than half of firms are either cutting or freezing employment, while only 14 per cent are increasing investment in staff.
Responding to the findings, the Country Head ACCA Nigeria, Toyin Ademola said: “Take North America out of the equation and the economic picture painted by this survey isn’t a pretty one. Emerging markets are besieged. Revenues for commodities firms have collapsed since mid-2014. And business confidence in China has fallen to its lowest level since our records began.
“Almost half of businesses reported a drop in income in Q1. As a result, every region except North America saw a jump in the number of businesses cutting capital expenditure. With emerging economies continuing to struggle with low commodity prices and many businesses on a spending lock down, the outlook for the global economy is becoming increasingly gloomy.”
Ademola identified sub-Saharan Africa as an area showing particular economic concern, saying that the report showed that China’s investment slowdown and the resulting collapse in commodity prices has hit business confidence in Africa hard.
According to the report, in the first quarter, 55 per cent of businesses said they had become less confident about the outlook – well above the global average of 48 per cent. Furthermore, it showed that more firms in Africa than anywhere else were cutting investment in capital projects, and the continent was also the region where businesses had the biggest problems with rising costs and foreign-exchange movements, with many of the region’s economies suffering sharp falls in their currencies in recent quarters.
It added: “As Africa’s most populous country and second-largest economy, Nigeria has been going through a downturn, and speculation of a currency devaluation is mounting and the government is struggling to cope with a collapse in its revenue as oil prices have fallen. The country is trying to diversify its economy but government revenues are still heavily dependent on the sale of crude oil.”
The economic issues facing the world are not limited to Nigeria however, according to Ademola, adding that “I t is the emerging markets more generally that are suffering most from bottom lines being squeezed:
“Wages are rising rapidly in many parts of the world and businesses are finding it harder to cope as revenues come under increasing pressure. The sharp drop against the dollar experienced by many currencies will also have pushed up costs, making imports more expensive and raising the value of dollar-denominated debts. All of this means that firms in emerging-market economies are very pessimistic about their prospects.”
She also warned that global policymakers could be running low on ammunition in the fight to turn things around.
“In developed economies, governments have worked hard to stabilise their debt-to-GDP ratios. Will they want to reverse that good work and risk the wrath of bond investors? It’s highly unlikely. Instead, we’ll see the heavy lifting left to central banks in the main. The problem with this approach is there are serious doubts around their ability – or indeed inclination – to provide more support.”