Grant Thornton survey finds global economic optimism highest since 2007, but pessimism persists in Thailand

Wednesday 07 May 2014 13:33
New research from the Grant Thornton International Business Report (IBR), a survey of more than 3,300 businesses in 45 economies, reveals a “spring surge” in business optimism, with all global regions marching in step, despite a slowing of growth in some emerging economies. The data suggests that the recovery is moving onto a more sustainable footing and, with economic uncertainty declining, the hope is that businesses will renew investment in the coming months to ensure long-term growth.

The IBR reveals that net 44% of businesses globally are optimistic for the economic outlook, the highest since 2007, and a 17 percentage point increase from the previous quarter. This confidence is in evidence across the globe: in North America (64%) optimism is at its highest since 2004, and in the EU and Asia Pacific (both 37%) since 2007 and 2008 respectively. In Latin America optimism rebounded from a four-year low in Q4-2013 to net 43%.

However in Thailand, optimism has continued its decline, down a further 10 points in the latest survey reflecting the current prolonged state of political and economic uncertainty and recent GDP downgrades.

Ian Pascoe, Thailand’s Managing Partner of Grant Thornton, commented: “The IBR data provides strong hope that the global recovery is starting to take hold. The rise in optimism closely mirrors recent growth of stock markets around the world - the S&P 500 closed at a new record high earlier this month. We have moved into the first prolonged period of economic stability since the financial crisis and while challenges remain, particularly in the Eurozone, Ukraine and some emerging markets, firms can think and plan for the longer term.”

“However this also serves as a stark backdrop for our own situation in Thailand where we are seeing a year of stagnation. In order simply to maintain jobs and the economy, Thailand needs to see a GDP growth of 4% however it will not reach that level this year, and may even struggle to eek that out in 2015.”

The study also reviewed regional optimism about the ASEAN Economic Community (AEC), which envisages a single market and production base for the ASEAN community that is characterised by the free flow of goods, services, investments, capital and skills. The majority of support is positive for plans to introduce a single market to the region, especially from Vietnam (74%), Malaysia (44%) and Philippines (42%). However, support from Thailand and Indonesia, the regions two largest economies, is considerably lower (18% and 9.8% respectively).

Ian continued, “At a time when the AEC is about to begin and opportunity for the region’s second largest economy should abound, Thailand is becoming paralysed by introspection.”

“Globally the IMF is predicting robust global growth of 3.6% this year. We believe conditions are perfectly poised for dynamic firms to begin to invest more. We expect to see this pick up during the rest of 2014. There has been a marginal improvement in plans to invest in plant & machinery, but R&D has remained flat and not increased in line with optimism. As IMF Managing Director Christine Lagarde said recently, “greater investment needs to happen if this new found optimism is to be converted into meaningful growth.”