The Global Economic Conditions Survey (GECS) for the first quarter of 2016 presents grim news: Despite indications that optimism may creep back up in the second quarter, in the first quarter businesses were less optimistic about their prospects than at any other time in the past four years. And as for the Caribbean, those economies affected by the commodities prices collapse have seen a sharp drop in optimism, with government spending in those economies - notably Trinidad and Tobago - expected to be at a minimum.

The Global Economic Conditions Survey (GECS) is the largest regular economic survey of accountants in the world, in both the number of respondents and the range of economic variables it monitors. It is co-authored by ACCA (the Association of Chartered Certified Accountants), a global body for professional accountants.

The ACCA said that with emerging economies continuing to struggle with low commodity prices, speculation intensified in the first quarter that the global economy might even be heading for recession. Efforts by the European Central Bank (ECB) and the Bank of Japan to increase monetary stimulus yielded unconvincing results, while the prospect looms of further rate hikes by the U.S. Federal Reserve.

"Latin America has also been hurt by the commodity price collapse, with 69 percent saying that they had become less optimistic in Q1," states the ACCA report. "The problems are especially acute in the region's biggest economy, Brazil, where President Dilma Rousseff appears to be on the brink of impeachment and GDP is contracting by 5.9 percent YOY (year over year) in Q4 according to government figures."

The ACCA report notes that parts of the Caribbean, most notably Trinidad and Tobago, have also suffered as commodity prices have fallen.

"A pick-up in tourism numbers and demand for financial services from the U.S., meanwhile, should help those economies in the Caribbean - such as Barbados, Jamaica and the Cayman Islands - where commodity prices are less important," the association said.

That last assessment is good news for the tourism-dependent Bahamas, where the path leading away from ratings agency downgrades would feature the completion, opening and successful operation of the Baha Mar resort.

Summary
The GECS showed that in the first quarter, businesses were less optimistic about their prospects than at any other time in the past four years. Almost half of the firms surveyed said that they were more pessimistic about their prospects than they were three months earlier. Less than one quarter had become more optimistic.

"More than half of firms are either cutting or freezing employment, while only 14 percent are increasing investment in staff. As many as 42 percent of firms are cutting back on investment, up from 40 percent in Q4, 2015. Almost every region saw an increase in the number of businesses cutting capital expenditure last quarter, with North America the most notable exception," the ACCA states.

The association added that the number of firms reporting a drop in income in the first quarter rose to 48 percent, compared with 46 percent in the final quarter of 2015.

"Declining income is now comfortably the biggest problem facing businesses. By the same token, only 12 percent of businesses saw an opportunity to increase their orders as a result of changes in the global economy last quarter," the ACCA said.

K. Quincy Parker
Guardian Business Editor

Click here to read more at The Nassau Guardian