The world economic climate has worsened in the fourth quarter, underscoring the threat that developed countries, particularly those in the European Union, will slide back into a recession, according to a recent survey.
Respondents’ view on the world economic climate tumbled to 78.7, a two-year low, from the year’s high of 107.7 in the second quarter, according to the survey by the International Chamber of Commerce and the Munich-based Institute for Economic Research, or Ifo. Future expectations fell to 71.9 from a first quarter high of 110.5. Assessments of the current economic situation fell to 86.0 from a high of 108.4 in the second quarter.
“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.
The ICC-Ifo survey, conducted in October, polled 1,119 economic specialists from business and academia in 119 countries. Their responses were compiled to produce a gauge of economic sentiment
Carrier said a recession could be avoided “if governments worldwide, and particularly in the euro area, succeed in convincing markets that the right decisions are being made.”
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 top problem shown in surveys last spring and “unemployment” in the survey a year ago, Nerb said.
The inflation estimate for all of 2011 remains at 4 percent on a global average, and the majority of respondents expect unchanged interest rates over the course of the next six months.
Survey respondents also said the euro is overvalued and the yen comparatively more so. On a worldwide average, the dollar’s exchange rate was expected to remain largely stable over the next six months.