Global economic confidence has been shaken by the war in Iran and surrounding countries, according to a new survey of accountants.
Processing Content
The
members and 72 IMA members in March, coinciding with the outbreak of the conflict, which is now in the midst of a tenuous ceasefire. Geopolitical ranked as the top risk priority for accountants in Q1,but it’s only the second time that economic risks have not been the top concern since the Global Economic Risks Survey was added in Q2 2023. Economic risks landed in third place, after cyber risks in second place.
“This shift does not suggest a reduction in economic worries, but a growing recognition of how converging forces shape the macro landscape,” said Rachael Johnson, head of risk management and corporate governance at the ACCA, in a statement. “Respondents point to AI and cyber threats amplifying other risks, and emphasize how eroding trust — in institutions, information and leadership — is becoming a defining feature of operating in today’s world.”
The percentage of respondents reporting increased operating costs reached its highest rate in Q1 of this year since Q3 2022, which was in the aftermath of Russia’s invasion of Ukraine. Given the recent spike in the price of energy and other essential commodities, and increasing stress in supply chains, the risk is that cost pressures facing firms will grow in the months ahead.
Despite the worries, some of the survey results were somewhat encouraging, thanks to the resilience of the global economy ahead of the onset of the conflict in the Middle East. The Global New Orders Index indicated a solid increase and is now at its historical average level. The Global Employment Index, which captures the hiring and firing decisions of firms, also improved to some extent, but remained below its historical average.
“The global economy entered 2026 in decent shape, but enormous uncertainty currently clouds the outlook,” said Alain Mulder, senior director of Europe operations and global special projects at the IMA, in a statement. “Inflation is already beginning to rise sharply, and downside risks to growth will mount the longer energy and other commodity prices remain elevated.”
The report noted that a permanent cessation of hostilities at the end of the current ceasefire and decline in energy prices over coming months and quarters would materially reduce the magnitude of the negative economic impacts, but the converse would be true if hostilities resume and upward pressure on oil prices builds again.
“Among the major regions and countries, the U.S. is a net energy exporter, which provides some offset for its economy from higher oil prices, while its abundant supply of cheap natural gas, whose price has been largely unaffected by recent developments, should help contain the extent of the rise in inflation,” said the report. “The economy is also benefiting from the current AI boom and tax cuts in the One Big Beautiful Bill Act (OBBBA). Nevertheless, absent a near-term settlement, the net effect on the economy will likely be meaningfully negative, as sharply higher gasoline prices weigh on consumer confidence and spending, uncertainty increases business caution, and as higher market interest rates raise borrowing costs for businesses and households.”
Credit: Source link
