Trade & investment
World economic climate improves, ICC-Ifo survey shows
The world economy is showing signs of brightening after six months of stagnation, according to a global survey of economic experts by the International Chamber of Commerce (ICC) and the Munich-based Ifo institute for economic research.
The latest ICC-Ifo World Economic Survey (WES) shows a climate indicator of 94.1 for the first quarter of 2013, up from 82.4 at the end of 2012 after two quarters of decline. The new global rise was driven by a significant increase in experts’ optimism for the six-month economic outlook. Meanwhile, assessments of the current economic situation improved only slightly.
ICC Secretary General Jean-Guy Carrier was encouraged by the survey results, but remained cautious. He said: “While the signs of a renewed economic optimism are a boost to confidence, fresh approaches by government and business are still urgently needed to drive economic growth.”
Ifo said positive business data from China and the US, after the first fiscal cliff had been averted, had helped lift the gloom. Another comfort was European Central Bank President Mario Draghi’s pledge last year to do “whatever it takes” to protect the eurozone from collapse.
The sharpest improvement in economic climate was seen in Asia, where the ICC-Ifo economic climate indicator rose above its long-term average. Since the end of 2012, experts have become more upbeat about Asia’s economic situation and expectations have surged.
The economic indicator for North America rose too, mainly due to the view that the current economic situation had improved, although it was still “not completely satisfactory”.
Euro zone’s glimmer of hope
Hans-Werner Sinn, President of the Ifo institute, said: “Assessments of the euro zone’s six-month economic outlook are now at their most positive for nearly two years which signals a glimmer of hope for the euro area’s economic situation.”
Overall, the survey showed the economic climate in Western euro areas to be poor but improving. This is mainly because of significantly brighter six-month expectations – in all euro countries apart from Estonia.
Survey respondents described the economies of Greece, Italy, Portugal, Spain and Cyprus as “ailing”, only slightly behind their euro neighbours. Only Germany and Estonia received positive assessments.
The World Economic Survey’s 1,169 economic experts in 124 countries were also quizzed on inflation. This gave a global average inflation estimate of 3.3% for 2013, down from 3.6% last year. Estimates for the euro area fell to 2.1% for 2013, from 2.4% last year. Short-term interest rates, set by central banks, are expected to remain largely unchanged over the next six months. And long-term interest rates, those affected mainly by the capital market, look set to rise only slightly.
WES participants expect the value of the US dollar to grow moderately over the next six months and the euro/US dollar exchange rate to remain stable.
Spotlight on SMEs
An ICC special question included in the survey revealed a broad worldwide consensus on the economic importance of small- and medium-sized enterprises (SMEs). Support was particularly strong in Europe where, according to the European Commission, SMEs provide two thirds of private sector jobs and account for 99% of all European business. Nearly all WES experts surveyed in Western Europe see a substantial and healthy SME sector as “essential for the national economy”.
Economic experts were also asked if SMEs’ access to bank credit had been troubled by the global financial crisis. The answer was primarily yes in North America, Eastern and Western Europe, Oceania and the Commonwealth of Independent States. Meanwhile, in areas less directly affected by the
crisis – Asia, Latin America, Africa and the Near East –SMEs had faced some difficulty in obtaining bank credit, but the problem was less pronounced.
Survey analysts pointed out that the short supply of bank credit, mainly in Europe, was a heavy constraint not just for SMEs, but for entire economies, particularly Italy, the UK, Hungary, Albania, Slovenia, Portugal, Ireland, Romania, Spain and Greece.
Download previous copies of the ICC/Ifo World Economic Survey
For more information visit the Munich-based economic research institute Ifo