Views on World Economic Climate hit fresh lows, ICC/Ifo survey reveals

22 November 2011

The world economic climate has worsened in the fourth quarter, as indicated by increasingly negative expectations from economic experts, according to the World Economic Survey (WES), published today by the International Chamber of Commerce (ICC) and the Munich-based Institute for Economic Research (Ifo).

The poll asked 1,119 economic experts from business and academic institutions to assess current and expected economic developments in their 119 countries this past October. Their answers were analyzed to reach a quarterly figure representative of the current economic climate.

Views on the world economic climate fell from a second quarter high of 107.7 points to 78.7 in the fourth quarter, marking the lowest point in the past two years. The falling figures reflect the waning optimism of expert expectations for the future, recording consecutive drops from 110.5 in the first quarter to 71.9 in the fourth.  Expert assessment of the overall current economic situation fell from a second quarter high of 108.4 to a year low of 86.0.

“These results demonstrate the fragile state of the financial sector, particularly in public finance, and underscore the threat that the still relatively strong real economies of many countries could slide into recession,” said ICC Secretary General Jean-Guy Carrier.

“However, it is not too late to avoid this destructive scenario if governments worldwide, and particularly in the euro area, succeed in convincing markets that the right decisions are being made," Mr Carrier said.

In North America, the economic climate further deteriorated, with the current economic situation increasingly assessed as unfavorable. The expectations in the region for the next six months were less confident than in the third quarter but remained in positive territory, the report indicates. In Asia, the economic climate indicator has fallen further and is now below its long-term average.

Expectations for the next six months continued to worsen in the region. And in Western Europe, a significantly more negative outlook was also brought on by a worsening economic climate.

“An interesting point of the recent results is that ‘lack of confidence in governments’ economic policy’ was regarded worldwide as the single most important problem for the first time since the survey was established, exactly 20 years ago now, “ said Gernot Nerb, Ifo Director of Business Surveys.

This lack of confidence in government economic policy replaced “public deficits” as the number one problem revealed by one of the previous surveys, in spring this year, and “unemployment” in the survey one year ago, Mr Nerb said.

The inflation estimate for all of 2011 remains at 4.0% on a global average, and the majority of WES experts expect unchanged interest rates over the course of the next six months. 

In terms of currency, WES experts also agreed that the euro is overvalued and the yen comparatively more so.  On a worldwide average, the exchange rate of the US dollar is expected to remain largely stable over the next six months.


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