• Ziggurat Realestatecorp

Business sentiment turns negative

Global business optimism following the recovery from the pandemic did not last, with sentiment returning to negative as the Russia-Ukraine war drags on and risks persist due to rising commodity prices.


Based on the latest Global Risk Survey of international think tank Oxford Economics for April, businesses perceive the war as the single greatest threat and top risk to the global economy.


“While near-term growth expectations have stabilized over the past month, business pessimism over the inflation outlook has compounded further,” Oxford said.

Oxford said businesses still believe risks are skewed to the downside and more than half or 57 percent have become slightly more negative over the past month.


The flash survey was completed by 159 businesses across sectors, largely on financial institutions, industrial manufacturing and materials, profession and business services, and real estate, real estate finance and infrastructure.

The think tank noted that the survey has confirmed a marked shift in business risk perceptions since Russia invaded Ukraine.


The severe and protracted war has topped the list, with close to 40 percent of businesses citing this as the top risk.


Other risks include elevated inflation, premature monetary policy tightening of central banks, and market turmoil due to rising inflation.


Businesses expect global inflation to hit seven percent this year, up from six percent during the March survey.


The perceived probability of particularly high inflation outturns has also increased. On average, businesses see a seven percent chance of world inflation exceeding nine percent this year, compared with just two percent previously.


While global inflation is expected to slow in 2023, Oxford said firms anticipate it would remain elevated at 4.6 percent.


Over the medium term, risk due to geopolitical concerns have reached a record high of 62 percent expectation from businesses.


Other risks in the medium term include climate change, stagflation, high debt levels, plunge of asset prices, disappointing recovery among emerging markets, and repeated pandemic waves, among others.


Also, only few are expecting an early end to supply-side disruption as 75 percent see disruption continuing beyond this year.


For this year, businesses are still expecting that the world’s gross domestic product will be at 2.5 percent, about 1.2 percentage points below the level anticipated prior to the war.


Nonetheless, Oxford said upside hopes are now perceived to rest mainly on economies learning to live with the endemic virus. Consumers’ willingness to run down savings accumulated during the pandemic also remains a potential upside.


Source: Philstar

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